It is fair to say that in recent years delivery has taken the eating out market by storm. This disruptive change in how we enjoy restaurant food brings with it both challenges and opportunities, which is why MCA has devoted a whole report to the subject. As Food Strategy Forum members and a leading food and drink strategic agency we went along to hear what they had unearthed. Here are our top ten take-outs:
1. In the wider eating out market – Growth is up, but from a low base in 2018. Breakfast is booming at the expense of lunch. Food to go is still out-stripping the rest of the eating out market with occasions up by 2.3%, accounting for over a third of meals. CSR is on the rise with restaurateurs and pubs looking to give back and do good and NPS (net promoter scores) are soaring as consumers like what they get!
2. The foodservice delivery market – Valued at £8.4 billion in 2019, it is up an incredible 15.1% over the past 3 years. The market has moved from direct delivery via independents in the 80’s and 90’s to the launch of Just Eat in 2006 and then the launch of Deliveroo in 2013 and Uber Eats in 2016, offering up not just the software platform for restaurants to get onboard with online ordering but also the delivery end.
3. The power of data – These delivery companies hold hugely valuable data which they can analyse to identify gaps in the market and advise restaurants on launching virtual brands to exploit the demand, as well as filling those gaps themselves with dark kitchens offering virtual brands. These big data companies are now also looking at other routes to drive revenue as Deliveroo launches a procurement arm and Uber Eats and Deliveroo look to offer click and collect.
4. Not just fast food – Although 100% of the top 100 fast food brands do offer delivery, currently if we look at the top 100 brands in each sector we see the following penetration for delivery – casual dining 70% , contemporary fast food 95%, branded restaurants 87%, bar restaurants 44% and even 17% of pub restaurants! The lower penetration in pub and bar restaurants being mainly driven by their wet led and experience focus.
5. The dark side – Dark kitchens may seem ominous and there has of course previously been controversy over food hygiene ratings and under-cutting high street brands with lower overheads, but done right they can help ease the pressure on restaurant kitchens, who can sometimes struggle to serve up food for eat in and delivery customers at the same time. They can also help brands exploit areas which are currently underserved by delivery and they can equally help brands diversify into specific menu items suited to delivery, launching a virtual sub brand which doesn’t impact on the mother brand. E.g. Café Rough Stack and Grill – Kingsway, Burger and Lobster Smack Lobster Roll – Soho and Chiquito Kick Ass Burrito – Exeter.
6. When & how – Overall we’re ordering more delivery and Just East is used the most frequently. Interestingly orders for one are on the increase, up 4% as people start to make delivery less of a treat / social event and more of a functional lifestyle choice. Lunch is currently up on last year, while dinner is down, again showing a move to more functional consumption. Over a third of orders are made via an app with only 11% over the phone, as we look to remove interaction with online convenience in a highly transactional purchase. Across the board consumers want value for money, with 23% using a discount code or voucher, ironically showing little brand loyalty but wanting loyalty rewards.
7. Impact – Worryingly for operators there does seem to be an element of cannibalisation. So although we know experience dining is on the rise with Millennials and Gen Z preferring to have a cool Instagram-able experience over purchasing items, it seems when asked, 34% of consumers agreed that “Using takeaway delivery services makes me less likely to have a meal in a restaurant” which is up 8% on last year. Another reason for brands to hedge their bets and offer delivery.
8. Choice & Quality – When comparing 20 casual dining and fast food brands’ eat in and delivery menus they found that the delivery menu was on average 32% smaller. Consumers are after a wide choice but understandably delivery menus tend to be far more focused, offering a pared down menu of the food that will travel well and is popular. Desserts and starters suffer the highest cull. Pizza, pasta and burgers are the most popular dishes, up 8%, 5% and 3% respectively on last year. A fact that may be due to the ability to customise these dishes. Whilst chicken is growing in popularity, up 4% and fish is declining, down 4%. Interestingly 21% had heard of virtual brands and 24% would be open to visiting a virtual brand’s physical site (if it existed). However, 21% agreed with the statement that “My food did not look as good as it does when in the restaurant” which is unsurprising, but a concern, as quality is the most important factor for delivery customers.
9. Pricing – Across the 20 brands delivery pricing was 6% higher than eat in due to commission charges that can be up to 30%! When looking at order bundles, larger orders are more cost effective, as the delivery cost is spread.
10. In Summary – Delivery shows no signs of slowing, so operators need to get onboard and manufacturers need to develop solutions across both packaging and ingredients that can help to ensure food reaches the consumer in a restaurant standard state – no mean feat when you look at how some of these delivery guys drive!
The rest of the presentation was dedicated to concepts to watch across the market, so if you are looking to try something new, look no further than…Electric Shuffle, Smoke & Dough, The Protein Bar, Dona Haus and Silo. Thanks to the talented team at MCA on this enlightening fly through of the delivery market. If you are interested in purchasing the in-depth report click here.