As a leading out of home agency we pride ourselves on keeping up to date with the latest trends and insights in the eating out market. Little wonder therefore that we are active MCA Insight Forum Members. Last week they held their quarterly debrief of the Eating Out in the UK Report and we were there to get the latest on the market. The report and briefing were, as always, hugely comprehensive but here are out top ten takeouts!
1 – Despite us being better off with strong wage growth at 3.6% (fastest since 2008) and household income up 6.1% (according to the ASDA income tracker) making us on average £12.32 p/w better off, consumer confidence is still at -11 (although up from -13) as Brexit fears grip the nation, with retail footfall down 2.9% YOY (hitting the high street hardest). However, eating out is still in growth (just) at 1.3% value and 0.1% outlet growth, which is worryingly the lowest growth for seven years and % vs. retail food and drink spend is also dipping at 42.2% as consumer eat out less, driven by healthy eating, the rise of convenient delivery services (which fall under in-home) and the fear of what’s to come, making them reduce discretional spending.
2 – The winners in today’s tough market? It’s retail, travel and leisure concepts which look to be the fastest growing sectors, mainly due to their smaller formats, lower costs to run and locations in high footfall sites. Convenience and value are key drivers in today’s market with coffee shops, sandwich & bakery, fast food and travel all doing well, as they offer lower ticket meals and snacks all day in accessible sites. Greggs is even trialling opening until 9pm in some sites. In this sluggish market the only way to grow is to steal share from your competitors, sweat your assets and offer good value and/or an experience that consumers can’t order in and enjoy on the sofa.
3 – The operators doing well are managing to offer a consistent execution, add value and enhance their relevance (with on trend dishes e.g. vegan, Asian etc.). In this hugely fragmented market McDonalds, M&B and Greene King are topping the charts, the latter two following a multi brand strategy and all managing to leverage their scale and consistency of offer. But a slow down in expansion rates is evident as operators look to maximise their current estate’s profitability rather than expand in the wake of some high profile closures.
4 – The good news…in response to the tough market operators are raising their game with Net Promoter Score up, with chain restaurants, independent restaurants and fine dining ranking highest. Pricing and value for money is key with a black hole identified in the £30-50 per head bracket which struggles to satisfy customers, quality is also up there, as is serving up relevant trends from vegan to craft beer to cocktails and gins. Offering an experience or ensuring it is ‘time well spent’ is also a big factor, from food halls with a plethora of choice to pubs with table tennis or just buzzy bars where people go to ‘be seen’ this is where out of home can win vs. in home. Pizza Express is trying to capture the food to go pound by launching ZA with sandwiches, salads, coffee and pizza by the slice – a departure for this sit-down concept and certainly one to watch. Speaking of which…
5 – Innovative concepts to watch include: Coqfighter – fired chicken and beer concept, hitting the Asian, indulgence and craft beer trends. Kebab Queen – offering posh kebabs eaten off the counter (I know!?) with 7 courses at £60, hitting the product rejuvenation, Middle Eastern and experiential trends. Little Farm – locally sourced all day dining situated in the Amazon office, hitting the locally sourced, tech-led (click & collect) and duel retail and foodservice blurring trends. Nathan’s Famous – USA hot dogs making their mark on the South Coast, this US import hits the American, fast food and regional trends. Hok Sek Noodles – from the founders of Rosa’s Thai Café this Chinese noodle concept offers grab and go in the day and a restaurant in the evening focused around 6 noodle dishes, hitting the duel concept and of course Asian trends. Finally The Green Vic (great name) aims to ‘do good’ as an ethical pub with homeless staff, a share of the profits going to charity and a focus on sustainability and vegan – so you can enjoy yourself whilst feeling highly virtuous at the same time.
6 – Consumer insight from MCA’s vast panel shows that although spend and penetration (percentage of people who eat out) is up (2.2% and 0.5% to 80% respectively) frequency is down with lunch hit hard (at a four-year low for this key out of home meal part) along with certain UK regions including Scotland, the South West and N. Ireland where eating out is lowest. However, London with its younger demographic, wealth of choice and innovation, as well as lower prices and ethical options is up 6% in frequency, out-performing the UK average of -0.6%. Breakfast is up 3% YOY with a move away from the Full English to healthier grab and go options and channels offering ethical dining. 44% of consumers said they paid more attention to environment practices than previously and 1 in 4 said they were reducing the meat in their diet. Bucking the downward trend (as highlighted earlier) are coffee shops, cafes, chain restaurants and sandwich bakery concepts offering value for money. So if you were to open a concept based on these findings you’d want it to have a strong breakfast offer, deliver quality value for money food and drink and represent ethical and sustainable practices (now off you go and launch it!).
7 – The B word loomed, as did the scary slides depicting the impact of a no deal Brexit and the possibility of wiping between £3.4-5.4billion off the value of the eating out market and reducing UK GDP by between 4.75% to 7.5%. So far UK GDP is 2% lower due to the effects of the Brexit referendum result and the eating our market is worth £1.4billion less due to referendum induced economic uncertainty. A sobering thought, so let’s hope we get a deal eh! With food line disruption possible and warehouses only able to hold a maximum of 10 days’ worth of stock, food shortages may be a reality if Boris does go through with his current bullish stance and leave come what may. But nobody has a crystal ball and there are so many factors to consider be it a general election, a deal at the last minute etc. so we’ll just have to wait and see.
8 – The future is hard to predict (unless you’re Mystic Meg) but we if take a glass half full look and assume an orderly Brexit there is a slight recovery expected in market turnover and outlet growth, channels focused on value and convenience are likely to thrive and there could be a £5.5bn three year prize for those offering exceptional value, service and experiences.
9 – What else? Well provenance and buying British may very well spike post Brexit. Wagamama under the ownership of TRG is looking at branching out into food to go. There may be a wet-led renaissance for pubs around craft beer and spirits and cocktails. As pubs also look to make the most of breakfast, all day dining, events, accommodation, outside spaces, games and experiences.
10 – In a nutshell…The fight for consumer spend will see those offering consistent execution, relevance and value win. Negative volume growth means operators need to steal from competitors and make the most of their current estates. To grow we need increased frequency of eating out – a tough one in the current climate, but there are opportunities for operators to drive custom by communicating value for money and ethical values. But all in all, our futures and the future of the eating out market in the next few years are in the hands of the politicians, so everyone cross your fingers!