As ever the Lumina Foodservice strategy forum was a deluge of data and insight. A hugely informative and useful look at the eating out market and of course as a leading food and drink agency with over 35 years in foodservice we were there to ensure we keep on top of the latest market dynamics and trends.

There is of course good news and bad news, so we’ll start with the bad first (you’ll be relieved to see the good list is longer!) …

The Bad News

  • With the cost-of-living crisis and the war in Ukraine consumer confidence is the lowest we have seen since the 1970’s at -41.
  • Household spend is down 6.5% YOY according to the Asda Income Tracker 2022.
  • There are strong headwinds slowing recovery for operators including: pandemic ‘hangover’, rising cost of living, labour shortages, food and drink price inflation, utility and product price increases, net outlet decline.
  • Inflation is likely to be higher for longer with predictions only seeing it ease in 2024 when energy prices come down.
  • There is a real staffing crisis, but this had led operators to look for ingenious ways to attract and retain staff e.g., Youngs Ram Agency offering highly flexible working and Rick Stein’s Flex Career Scheme. A multi-role initiative where employees can try out lots of different positions.
  • The top 10 eating out companies will see a turnover share contract to 15.9% (1.3ppt down vs. 2019).
  • Consumers are becoming far more price and value driven, with ‘price-led’ up 2ppt vs. 2021 to 72%.
  • Younger 25–34-year-olds who over index for eating out are cutting back on spend out of home due to the cost-of-living crisis. Bad news for operators as they are a big part of the market.
  • Menu price inflation is inevitable with the cost-of-living crisis but may put off consumers who are looking to tighten their discretionary spending. We have seen a menu price increase of 1.3% from March to May! With coffee and sandwiches up 5.1% mainly driven by seasonal specials and premium drinks. In QSR starters and sides are where we are seeing the biggest price rises.
  • In pubs and Bars operator are using left digit anchoring to engineer pricing (favouring .99 & .95). Whilst bold whole figure pricing tends to signify premium menus.

The Good News

  • The eating out market is forecast to be worth £95.2bn in 2022 up 4.2% on 2019 (but somewhat driven by inflation).
  • By 2025 the market is predicted to be worth £102.8bn.
  • Lower ticket operators who were less exposed during the pandemic are bouncing back quickest as consumers look for affordable on the go options. These are QSR, sandwich & bakery, cafes & coffee shops, and dessert chains. Having benefited from grab ‘n go and delivery options as well as digital strategies, these guys are doing well. Indeed, we are seeing expansion across big chains like Greggs, Costa, and Starbucks as they diversify into new territories including drive through, travel hubs and retail linkups (e.g., Sainsburys and Starbucks). They are also offering more premium options to drive transaction value and looking at omni channel strategies to drive growth.
  • Pubs and restaurants were hard hit by the pandemic and have been slower to pick-up than QSR and high street food-to-go, but have the highest share of the market.
  • Fast food has seen the biggest share growth, driven by the big three and delivery. Whilst managed branded and franchised chains top the value growth chart.
  • B&I catering, hit heavily by working from home is stealing share from QSR through value pricing, although so is retail grab and go.
  • We are likely to see more outlet growth in 2022 with more reasonable rents in city centres and brands opening up in more suburban areas.
  • When it comes to day parts dinner is losing out. Lunch, brunch, snacks, and drinks are up, with snacks and drinks possibly driven by the lip stick effect.
  • Despite far more choice post restrictions easing from dine in, delivery remains strong at 12.1% of the market and is predicted to reach 12.4% by 2025 (from 7.1% in 2019).
  • Operators are moving towards more premium formats to drive spend per head as consumers look for a real experience when eating out, e.g. Marston’s moving away from 2-4-1 to their more premium and wet-led Signature brand. Whilst Stonegate opens up more of their premium Chapter Collection food-led city centre sites like The Clerkenwell (showing faith in the resurgence of city centre trading).
  • There are lots of opportunities for operators including sporting events, (Women’s Euros & FIFA), a hot summer ahead, new territories like drive through, delivery, digital to drive loyalty and up-sell, space utilisation to maximise day parts (e.g., Gregg’s dinner occasion targeting suburban commuters) and square footage and proximity to consumers in the new normal.
  • Casual dining brands with delivery are outperforming their more formal counterparts e.g., Nando’s and Wagamama. Whilst occasion focused brands like TGI Fridays, Cote and Miller & Carter are benefiting from social occasions which are a strong driver for consumers.
  • Operators focused on specific world cuisines are doing well (Indian, Chinese, Mexican). Plant based continues to flourish.
  • Operators are looking to tap into occasion dining to drive transaction value by premiumisation e.g., Big Table Group switching sites to Amalfi and Café Rouge to Rouge. With consumers prepared to splash out on occasions with friends and family.
  • Operators are adapting and trying new things e.g., Burger King vegan take over, Leon’s points scheme & McDonalds separate sections for delivery drivers to improve the walk-in experience.
  • There are some interesting new operators worth keeping an eye on, including: Acme Fire Cult Dalston, Bun House Camden, Festival Village Edinburgh, Myungrang Hot Dog Islington, The Vurger co Manchester and Vagabond Heathrow T5.
  • Older consumers (+65’s) are coming back to eating out and tend to be more affluent so will have a higher ticket spend.
  • Operators can look to drive business by focusing on value-led and social occasions messaging.
  • Convenience has long been a mega trend but proximity is more important than ever with the return to the workplace so the right location strategies can open up new opportunities.
  • After pandemic menu shrinkage, chain restaurants are expanding their menus once again with new items on the increase. With three out of four new menu items priced higher than existing, helping to mitigate cost and labour pressures.
  • High margin low skill dishes like the ploughman’s are making a renaissance in light of labour shortages.
  • Customisable dishes are still big with 40% of customisable options being an up-sell option.

The debrief was followed by an IRL food tour.

Read more about that in Abi’s blog here.

Well done to all the team at Lumina, we look forward to the next one in September!