Crafted Coffee Gives Cracker Barrel a Jolt
Before same-store sales declined 0.4 percent in Q3 2017, Cracker Barrel appreciated 11 straight quarters of positive gains. Is the 653-unit chain ready to stage another impressive run?
Cracker Barrel’s comps increased 1.5 percent in the third quarter of fiscal 2018, year-over-year, marking the third consecutive positive period for the brand.
On a two-year stack, here’s how Cracker Barrel’s business is trending upward:
- 3Q: 1.5 percent
- 2Q: 1.1 percent
- 1Q: 0.2 percent
- 4Q 2017: -0.2 percent
- 3Q 2017: -0.4 percent
- 2Q 2017: 0.6 percent
- 1Q 2017: 1.3 percent
Sandra Cochran, president and chief executive officer of Cracker Barrel, said during a conference call that the brand’s solid Q3 results even topped in-house expectations. Diluted earnings per share of $2.03 represented a 3.9 percent lift over the prior-year period. Net income came in at $48.7 million—3.9 percent higher the Q3 2017.
Homing in on sales growth, Cracker Barrel’s gains were credited to a 2.8 percent hike in average check, partially offset by a 1.3 percent decline in traffic. Retail sales also gained 0.9 percent versus the year-ago quarter. The check growth was credited to Cracker Barrel’s Crafted Coffee initiative and its spring Southern Bowls promotion.
There are plenty of additional factors driving Cracker Barrel’s growth. The chain’s off-premise plans progressed in the quarter across its three platforms: individual to-go; Heat n’ Serve; and catering. Cracker Barrel’s off-premise sales were just below 7 percent of mix last year, and the company hopes to top 10 percent over the next three. Year-to-date, off-premise is accounting for about 7.5 percent of Cracker Barrel’s business.
Cochran said Cracker Barrel’s individual to-go sales have largely occurred organically so far, which presents the greatest future opportunity. Testing third-party delivery is on the dock for the coming quarters, Cochran said.
Cracker Barrel is also expanding its in-house delivery program “in the coming quarters to further support our off-premise initiatives,” she added.
With Heat n’ Serve, Cracker Barrel is taking the platform to additional occasions, such as Mother’s Day, following recent success. Cochran said the chain expects a significant increase in sales versus the prior-year period thanks to Easter.
Catering continues to grow as well. Cracker Barrel introduced Breakfast Bundles this past quarter, which added new menu offerings bundled with complementary items, such as the Cracker Barrel Classic—a collection of ham, egg and cheese casserole, grits, sawmill gravy, and biscuits, along with a choice of breakfast meat and hash brown casserole or fried apples. New exclusive catering items are set to begin testing in two weeks.
Cracker Barrel opened four stores in the third quarter, including its first California location. The company has opened a total of eight this year. A Holler & Dash debuted in Charlotte, North Carolina, last quarter to bring the total to seven stores, three of which came to market in fiscal 2018.
Cochran also highlighted Cracker Barrel’s recent menu innovations, which spotlighted a Q3 LTO run of Southern Bowls. Supported by five weeks of TV ads, Cochran said the items resonated with frequent and infrequent users of the brand.
Just this past week, Cracker Barrel brought back its annual summer Campfire menu. New items include: Smoky Beef Brisket Breakfast and Roasted Sweet Glazed Chicken. The promotion will last eight weeks.
Cracker Barrel completed the rollout of its Crafted Coffee platform in April. Cochran said the chain’s specialty beverage initiative around hot and cold espresso drinks is driving check favorability. In the past quarter, Cracker Barrel introduced a signature Goo Goo Cluster Latté based on the iconic candy created in Nashville in 1912. The drink is a blend of rich espresso and steamed milk combined with classic caramel, milk chocolate, peanut, and nougat flavors. Similar promotions are coming, including the Campfire menu S’mores Latté featuring marshmallow, milk chocolate, and graham cracker.
"We have got the Crafted Coffee fully rolled out and we will be able to do a more effective job of marketing that as well, as we are getting some traction in our off-premise business, especially the catering side," Cochran said, adding that Cracker Barel is excited about some future tests, like bone-in fried chicken and family sized meals.
The premium products are balanced by Cracker Barrel’s everyday value platforms: Breakfast $4.99 offerings; Weekday Lunch Specials at $5.99; Country Dinner Plates at $7.99 for dinner; and Daily Delights. In August, Cracker Barrel plans to rollout a $4.99 Sunrise Special as part of its Daily Delights program nationwide.
Don Hoffman, senior vice president of marketing, said research has shown Cracker Barrel’s value proposition to be a powerful sales ally. “Our culinary and marketing teams continue to look at a range of strategies and program tactics to reinforce the value that we offer to the guests. As an example, we are looking at family size meal offers, different bundling options, some new product news within our breakfast, lunch, and dinner dayparts,” he said.
On the retail side, Cochran said Cracker Barrel continues to assemble unique assortments that resonate with guests. “Our retail theme business performed well, and in addition to returning favorites, we continue to introduce new themes such as our retro collection, which focused on nostalgic items inspired by the 50s, 60s, 70s, and 80s, and had broad generational appeal. Additionally, we again improved our conversion of restaurant guests to retail purchasers.”