What's on the Horizon for 2015?
It is often said that there is a lack of real insight in the foodservice marketing compared to consumer and retail, but with the likes of Horizons and the often untapped resource that is wholesaler ‘sales out’ data, we work with our clients to effectively unearth those killer nuggets of insight that can help brands open up the foodservice opportunity. We have partnered with Horizons on a number of projects through the years, as well as incorporating its Key Club sessions into our staff training to ensure we keep our edge as the leading foodservice marketing agency. We strongly believe that only by really understanding the market landscape, influences and trends can you create effective campaigns which offer cut-through and deliver ROI for brands in the OOH arena. To that end we always make a point of attending the Horizons annual breakfast briefing to get the very latest insight on the market.
This time around the event was hosted by Dentons – the largest law firm in the world! But we weren’t surrounded by lawyers, instead anyone who’s anyone in the industry was present to get the inside track on what is happening and a glimpse into the year ahead from Peter and his team. As ever the session kicked-off with an introduction from Mike Southon and a state of the nation view on the economy from Peter Andrews of the Bank of England. Due to ‘Chatham House Rules’ I can’t divulge the details but as he took me back to the days of A level economics with a range of charts and graphs detailing the state of the economy one thing was clear (in contrast to the briefings of the past few years) things are looking up.
Then it was on to Peter and the Horizons team to take us through the foodservice market. Below is my executive summary of the presentation…
The Market Headlines – F&B sales in 2014 rose to £46.6bil (+3.8% nominal growth, +2.9% real growth). 2015 will continue to see growth as we return to 2008 levels (the previous peak) as Horizons believes (at constant prices) F&B sales will total £47.8bil up by £1.2bil in the coming year. Whilst long term the market is likely to hit £56.3bil in 2019 (+3.9% nominal CAGR).
Winners and Losers – Based on growth the top performing sectors include: pizza delivery, managed pub brands (e.g. Wetherspoons), pub restaurants (driving the restaurant sector), primary schools and coffee shops. Overall groups are performing better than independents and casual dining groups & fast casual (e.g. Pret) in particular are doing well. Lowest performing sectors are: staff catering, healthcare, police stations(?!), Chinese and oriental take-away, airline catering, fish & chip shops and cafes. Moving away from operators to the route to market, 2014 looked positive with growth across all temperatures and channels, with the strongest growth showing in fresh and contract distribution.
Vouchers – Gone are the days of blanket 2-4-1s. Now discounting is hard-wired into the menu engineering and is used tactically around occasions and opportunities to attract consumers in and drive sales in a far more sophisticated and strategic way.
Operator Margin – Good news! After the days of food inflation and consumer price inelasticity which put huge pressure on operator margins, we now see food prices lower and selling prices increasing, giving operators better margin and therefore money to invest in the future.
Growth Factors – Population growth, an increase in meals served in the profit sector, an increase in average spend per meal and inflation at +2.2%.
Eating Out – Overall, consumers are eating out more in 2015. With penetration growing, as well as average spend rising. 25-34 year olds have the highest eating out penetration.
Cuisines – Burgers remain the No.1 item on menus with US inspired, world cuisines (including Peruvian & Lebanese), health & wellbeing and premiumisation and indulgence all coming through strongly on menus from the Menurama insight.
Ones to Watch – Based on the fastest growing small brands (5-25 outlets) and growth of >20% since 2011, here are some of the names to watch out for: Fuel Juice Bars, Dunkin’ Donuts, Abokado, Tortilla Mexican Grill, Pieminster, Boost Juice Bars, Chozen Noodle, Decks, Five Guys, Farmhouse Inns, Wildwood, Brasserie Blanc, Coast to Coast and El Mexicana.
Trends – As far as concepts go, the strong trends include: healthy quick service / fast causal, Italian (all sorts), Mexican fast casual / casual dining, British casual dining, steakhouse casual dining and coffee shops.
Beyond London – Smaller brands are avoiding the prohibitive rents of the capital and opting for other top conurbations such as Manchester, Bristol, Glasgow and Leeds. Some are even actively focusing on market towns and secondary cities to drive growth.
The London Bubble – The eating out market in London is growing, out-performing (as usual) the rest of the country. This has been driven predominately by groups. Why the London bubble though? Well it has a lot to do with the demographic mix with a higher concentration of consumers in their twenties and thirties who tend to eat out the most.
The UK Leads the Way – It’s fair to say that London has one of the most dynamic, influential and vibrant eating out sectors, indeed over 50% of the top casual dining brands in Europe are UK based e.g. Nandos, Pizza Express, Frankie & Benny’s, Harvester and Hippopotamus. These alone account for half of the top ten casual dining brands in Europe, with Nandos topping the chart achieving F&B sales of over $700mil based on their latest year-end figures.
Risks for 2015 – Despite the more rosy outlook for the eating out market there are still some risks which could throw everything off-kilter, including: the economy (volatile oil prices, Eurozone etc.), political uncertainty (May’s election in the offing), international uncertainty (terrorism, Syria, Ukraine etc.), the British weather (and all its many extremes), the unexpected (e.g. ‘horsegate’) and even operators hitting the headroom ceiling, as growth opportunities are ‘maxed out’.
Crystal Ball – The foodservice market is never an easy one to predict, but looking ahead to the rest of 2015, Horizons believes (at constant prices) F&B sales will total £47.8bil, up by £1.2bil. QSRs, restaurants (including pub restaurants) and hotels will continue to grow, whist, staff catering will see a downturn and healthcare will remain static. Indeed education is the most promising area of the cost sector, showing growth which is mostly driven by the universal school meals initiative.
2015 in a Nutshell – Less uncertainty! Phew!
With such a comprehensive round-up on the market, once again congratulations must go to Horizons on a hugely informative event. Thanks also to Dentons for hosting and providing a stunning view and pretty impressive breakfast spread. Not to mention our facilitator Mike Southon and the panel discussion group from Dentons, Elior, Wafflemeister and of course Peter Backman himself. Catching-up with friends and contacts afterwards I know I wasn’t alone in thinking that the early start was well worth it – the early bird and all that! Now I’d better get off and put all this solid information into action for our clients!
To find out more visit http://www.hrzns.com/