The annual MCA Top of Mind Report debrief offers both an overview of the eating out market over the past year, as well as some predictions for the year ahead. Now in its 11th year, the briefing took us through macros trends, 2017 consumer behaviours, predictions for 2018, a state of the nation across casual dining, growth drivers, the results of their decision maker survey and of course concepts to watch for 2018.
The morning was packed with stats and insights but here are our top take outs…
The macro economy – Despite the current Brexit uncertainty, the good news is January has seen consumer confidence improve from -13 in December to -9, so not great, but a move in the right direction. Plus, the Coffer Peach Tracker was down in December but up 0.6% in January, driven by the pub sector. Discretionary income is also still negative, but GPPs OK and unemployment is at its lowest since 1975. All in all, it’s not a rosy picture, but the economy is stable. What the eating out market needs, is a raise in wages which could be around April when the National Living Wage goes up by 4.4% (above inflation), so let’s see.
Consumers in 2017 – The MCA eating out panel of 6,000 consumers has shown a decline in out of home meals and snacking. Frequency per month is down -9% with total frequency down -8%, whilst spend per visit is up 2% to £7.60, however the drop in frequency means that total spend is down -6% to £68.9bn. There has been a decrease across all day parts, with snacking and dinner hit hardest, down 10%, as consumers cut back on unnecessary purchases. Lunch has been more resilient as it is often a routine-based necessity and breakfast has been hit but remains popular. Younger consumers have cut back most on visits, but their spend is up across the board with snacking seeing an average spend up 7% (but from a small base so it is less noticeable). Over 50-year olds and 25-34-year olds are also spending more.
Where consumers have been eating out in 2017? – Based on % share of visits for the top 5 channels, service led restaurants are up, fast food is down, pub restaurants are up and coffee shops are down along with supermarkets. Pubs and restaurants outperformed the rest of market for visits with a big increase in independent restaurants (or at least outlets consumers believe are independent). Independent fast food is suffering, while pub restaurants are being driven by the big brands. Coffee shops have seen a 1.2% decrease in share, which has hit independents especially hard, whilst the supermarkets are also down, but this hasn’t seemed to affect the big three in the convenience food to go world.
What missions were consumers on in 2017? – ‘Having a treat’ has remained steady and ‘getting together’ is up, but ‘while out shopping’, ‘regular’ and ‘work study break’ are down. The ‘couldn’t be bothered to cook’ occasion has been hit the most noticeably by the rise of delivery options. As for what was important to consumers, unsurprisingly quality of food and good value are both up as consumers become more discerning about where they spend their limited disposable income. Service led restaurants score well for quality and pub restaurants score well for value for money. As for how different age groups are behaving…18-24 year olds want healthy, cheap and fast service, 25-35 year olds want family friendly, healthy and clean, 25-49 year olds want family friendly, convenient and fast and 50+ year olds value previous experience, a nice environment and a convenient location.
Food choices in 2017 – For breakfast the Full English remains at the top, but bacon sandwiches are losing out to sausage sandwiches. Lunch sees the beef burger top the charts (slightly down), followed by the chicken sandwich (down slightly) and Fish and chips which is up driven by pub sales. Dinner sees the beef burgers up, curry down and fish and chips down. While snacking sees crisps down, cake down and cookies in third place.
What’s been going on in 2017? – In pubs and casual dining there have been a lot of mergers and acquisitions (M&A) such as Heineken & Punch and Admiral Taverns, as well as the refinance of Be At One, the turn-around of Revolution Vodka Bars and the City Pub Group stock market floatation. Some mid-sized restaurant chains like Jamie’s and Red’s saw closures. The ‘better burger’ sector have had some issues and closures with Byron and GBK, while the likes of Five Guys continued to thrive, possibly as burgers work better as a quick service offer. There have also been personnel changes at the top of groups like Jamie’s, Wagamama, Groucho, Carluccios and GBK.
2017 eating out market winners – In 2017 we saw 1.7% growth bringing the market to £87.9bn, although inflation means it is negative volume growth with more spend but less outlet growth. This is down to the following factors: visit frequency down, spend per head under pressure, ingredient and produce costs, staffing issues and increasing labour costs. However, despite these headwinds there were some notable winners i.e. Milller & Carter, Stone House Pizza, Carvery (M&B) and Chopstix.
Spending predictions for 2018 – 48% of consumers expect to see no change to their spending power but 31% expect it to decrease and 21% to increase. 61% of consumers expect to eat out at the same level, 27% less often and 12% more. Younger people expect to eat out less often as their income is lower and more under pressure. Overall the market should improve slightly with less of a decrease in visits than we saw in 2017 and average spend will likely level out, especially with more deals on offer. Improving consumer confidence will be key to a better eating out picture which is strongly linked to what happens with Brexit.
Growth predictions for 2018 – There is likely to be more M&A in the pub sector, there may be some breakaways e.g. Costa from Whitbread, while partnerships with key travel hubs, delivery companies and service stations will be growth drivers. The brands who manage to pull off ‘looking like’ independents are likely to do well.
The market in 2018 – Looking at the top 150 brands, MCA predicts the market will grow by 3% with 10 new openings per week! Subway and McDonalds will be driving this with the large and smaller chains (Giggling Squid, Doner Kebab etc.) doing well, while mid-sized operators will find it tough. Asian food will feature strongly e.g. Kokoro Sushi and Bento, but equally innovative smaller chains like Veeno offering Italian aperitivo and wine should be well placed to thrive. Losers are likely to be in the mid-sized chains like Jamie’s, Lock Fyne, Harry Ramsden’s and Giraffe. As for market value in 2018, we’re looking at around £89bn (including children and tourists) at a growth rate of 1.5%.
What the movers and shakers think – Trading is challenging but things are better than 2008. Leaving the EU has had a negative impact with issues around attracting and retaining staff, consumer spending down and rising food ingredient costs. We can learn from the best performing brands like Prȇt, Nandos and Wagamama, that a clear simple offer (and possibly a red logo) are the key to success! Industry leaders polled predicted the following to outperform the market…street food, delivery, contemporary fast food, food to go, chain operators and coffee. They see differentiation, customer service, employing high calibre front line staff, innovation, creativity and building customer loyalty as key. As for passing on costs to customers, with in-costs on the up, 62% of industry leaders polled believe they will be putting their prices up, whilst 17% disagree and 21% neither agreed or disagreed, with many planning to avoid menu price rises by increasing efficiency through technology & training. Technology is also seen as key to gaining more comprehensive customer feedback and insight, as well as helping with payment processing, customer loyalty and staff communication.
When it comes to mega trends impacting the market, these are the top five that industry leaders predict will be shaping our eating out experience – the changing behaviour of millennials, demand for delivery, experience driven behaviour, healthier eating and squeeze on-household budgets. However, interestingly it seems the importance of healthy eating is dropping, as in 2007/8 it was no.1 but has now dropped to no.4 due to the rise of other market dynamics. Conversely when asked which trends are likely to grow fastest 75% said healthy eating, followed by premium chicken 28%, global fusion 21%, contemporary Indian 21% and Thai 13%.
As for the market in five years’ time, 92% believe consumers will eat out more frequently once we are over the hump of Brexit and with the market changing for the better across: quality, engagement, health, experience, innovation, choices, technology, delivery, convenience and diversity. As for how they see businesses thriving in today’s market, well, learning from the best, focusing on the out-performing channels and riding the mega trends would seem to make sense.
Ones to Watch – The following concepts have been highlighted as ‘ones to watch’ by MCA – let’s see where they are in a years’ time!
Where foodservice and retail blur in an exciting Korean concept.
Broadway Market street food butter milk chicken sandwiches now opened in Shoreditch site
Offering quality and value – but be ready to queue.
Sano To Go
Lifestyle brand featuring culinary medicine, with healthy colourful Instagram-able food.
Personalised food concept with a focus on health and technology. Now opening a third site and looking at a more casual dining format.
The Kitchens at Old Spitalfield Market
Street food market with some exciting brands.
From the guys behind Burger & Lobster, offering premium meats and sides.
Winners of Best Steaks and Grill Award.
Cookhouse and Pub
Whitbread concept attached to Premier Inn, brunch led concept.
The Butchers Tap
Green King and Tom Kerridge tie-up. Offering a local hub with a butchers and pub concept. Possibly looking to extend to Bakers Tap, Fishmongers Tap etc.