As a leading integrated food and drink agency we make it our business to keep up to date with the latest trends and dynamics in the eating out market. Part of this ongoing commitment is our membership of the MCA Forum who shared their latest report on the eating out market last week. As you can imagine this a hugely comprehensive report which covers off economic trends, operator challenges, consumer insights and much more (and well worth joining to receive). However, these are my top five take-outs from the half day briefing to help keep you in the loop when it comes to foodservice, hospitality and eating out as a whole.
1 – The Market – 2018 sees the eating out market valued at £89.4bn with 327,000 outlets and is growing at just 1.5% (the slowest rate in the past five years) mainly due to reduced consumer demand in the context of wider economic uncertainty. Lower ticket sectors are faring best, with restaurants hit by the ‘casual dining crunch’(casualties including CAU GBK and Jamie’s) as oversupply and soft consumer demand lead stronger, more consumer-centric operators to steal share from weaker competitors. The top 10 eating out brands are now all part of the £10bn club, but crucially the market is highly fragmented with these operators accounting for only a mere 17.6% of total market sales, growing at 0.3%. The most consolidated parts of the market are supermarkets, bakery, sandwich and coffee shops, while branded fast food and branded restaurants move away from a high concentration of consolidation with contemporary brands like Pret and Itsu challenging the established leading players like MacDonald’s & KFC. Indeed, leading operators within the branded restaurant sector are set to suffer the most in 2018 with a predicted decline of -1.6%. However, on the flip-side, coffee shops/cafes are looking at the highest outlet growth of 1.6% with all-day dining/contemporary pub chain Loungers set to become the fastest growing brand of 2018 with 50.5% growth to 140 outlets, which is indicative of more contemporary concepts like themselves and Brewdog stealing from traditional pubs.
2 – Consumer Habits – Frequency of visits is falling, offsetting the increase in visitors (penetration) and average spend (driven by menu price inflation). There is a decline in visits across all day parts, with the biggest decline in dinner followed by snacking. Consumers are cutting back on treats, as well as lazy and routine missions, while social get-togethers remain a strong driver. Unsurprisingly quality, value and convenience/speed are their key priorities when it comes to eating out and those operators who deliver against these are the ones who are weathering these challenging times. Little wonder promotions have seen a sharp rise with 13.6% of visits involving a promotion (increasing value perception). This rises to 31.5% in branded restaurants up a huge 7.5% yoy. Overall industry standards are improving, as indicated in a rise of net promoter scores from 26 in 2016/17 to 30 in 2018, but this in turn shows that we are becoming more choosy, which is weeding out the poorer performing operators with a rebalancing of the market.
3 – Demographics – Consumer segmentation is a useful tool to help see what dynamics are at play when it comes to the eating out market. Unsurprisingly millennial ‘home builders’ (25-34 no kids) eat out the most (although are slightly down on last year). However, the ‘Greying Generation’ (55-65) and ‘Golden Oldies’ (65+) are high spenders (up on last year) and worth considering as a strong target audience for coffee shops, supermarket cafes and pubs, driven predominately by social occasions. ‘Humble Householders’ (35-54 with kids) have seen a small increase in visits, driven by convenience and work related missions focused on outlets like Co-Op food to go, Hungry Horse and KFC, but driven by value they are not as loyal. ‘New Parents’ (25-34 with kids) are putting a break on eating out, but when they do venture out they are choosing family friendly operators like Starbuck, Asda, KFC and Burger King. As far as looking to the future we are an aging population, so if those moving into the greying generation and golden oldies continued to have the same preferences then coffee shops, supermarket cafes and pubs should all be rubbing their hands together. However, as the ‘baby boomers’ who have been brought up on eating out start to come into these categories we may well see a change in preference as they bring their more contemporary tastes to bear.
4 – Ones to Watch – As devoted foodies the Beans are always keen to hear about the latest concepts and openings in the eating out market. Today we were not disappointed with a whistle-stop tour of the following: Alf’s Supernatural (healthy all day concept with lots of veggie and vegan options – named after their dog!), Brigadiers (based on the British Army mess’ of the Raj, from the people behind Gymkhana, with contemporary Indian BBQ cuisine, themed rooms, a whisky vending machine and cocktails on tap what’s not to like!); Frites 33 (this Belgian chip concept has great fries and a choice of 33 toppings as well as ambitious plans to expand via franchisees across the UK, but is currently to be found in Nottingham and Derby); Wahlburgers (from Mark Wahlberg no less – brings a new player to Covent Garden and the premium burger space come September, with the addition of a bar and the chance to Skype Mark himself it’s got be worth a try); Woky Ko (this Asian sharing platter concept in Bristol’s Cargo incorporates theatre and street food favourites like Bao – delicious!) and finally St. John at Hackney Brewery (a design-led church themed tap room with a range of affordable guest food concepts – the first being Cypriot – I’m in!).
5 – The Future – There is hope that we will see more stability in a post Brexit world, so MCA are predicting modest growth by 2021 with turnover growth at 2% and outlet growth at 0.2%, which sadly points to menu inflation more than anything driving additional value. By 2021 it envisages 331,131 outlets and a market value of £94.4bh – an increase of £5bn from 2018. So all in all not hugely rosy, but not terrible either and in a context where a foodie culture is so prevalent and eating out participation rising from 92.8% in 2017 to 94.3% in 2018 things could be worse.
A big thank you to all the MCA team on a great event and a very informative report. To find out more about MCA visit www.mca-insight.com