As a leading food and drink agency, insights and data are at the heart of our marketing campaigns. So, understandably, we make a point of keeping our finger on the pulse by attending Lumina Intelligence’s Food Strategy Forum.

The latest session delved into the current market condition and forecasted trends, with an emphasis on both the evolution of consumer and operator behaviour over Christmas and more recently. Here’s a glimpse into some of the most recent market dynamics and trends impacting consumers, operators, and brands – which, thankfully, show a promising glimmer of hope for hospitality:

The Outlook

Consumer confidence at highest point in two years

  • Although consumer confidence remains volatile with inflation, mortgage rates and the start of a recession impacting everyday finances, economic pressures are expected to ease off, with the total eating out market forecast to total at ÂŁ98.8bn in 2024.

Food inflation is easing, but the Spring Budget lacks bite for hospitality

  • Although inflation remains up, it is gradually decreasing, alleviating pressure on both consumers and businesses. Food inflation has dropped to +7% from +8% in December, marking its lowest point since April 2022.
  • Market growth is fuelled by inflation, with stronger economic activity and investment all contributing to growth, particularly within the food-to-go (FTG) sector. For more intriguing insights on FTG, checkout our MD’s latest blog that provides a current snapshot of the sector.
  • The Spring Budget announced the continuation of alcohol duty freeze, but operators feel unsupported, as calls to reduce hospitality VAT and implement VAT-free shopping for overseas tourists were overlooked.
  • In a positive step however, Mayor Sadiq Khan has introduced ‘Off-peak Fridays’ until May 31st, aiming to ease financial strains and encourage Londoners to socialise at pubs and restaurants.

Site formats, employee conditions and coffee are key market areas to watch

  • New sites and location formats are on the rise, with WHSmith opening the new chain ‘District Market Coffee’ within hospitals, Prezzo introducing a QSR format and Popeyes expanding into travel hubs to double their UK estate.
  • Volatility persists in workers’ pay and strikes, with BrewDog withdrawing from the Real Living Wage scheme, PRET offering a 6.6% pay rise to warehouse and delivery staff, and delivery strikes across Deliveroo, Uber Eat and Just Eat causing disruptions during peak delivery occasions such as Valentines Day and 17:00-22:00 PM on Fridays.
  • Brands are focusing on breakfast and coffee, with Joe & Juice following the like of WatchHouse and proposing a similar specialty coffee offer. Popeyes have also stepped to up their breakfast game with a new breakfast range that includes meal deals from under ÂŁ2, and an ambitious expansion plan to open 30 new sites in the next 12 months.
Consumer Update

Dinner occasions and quality consciousness are on the rise

  • Frequency remains stubbornly flat as consumers remain selective, but there has been a shift in day-part share of occasions, with dinner up +1.8ppts compared to 2023. This increase reflects less train disruption and consumers seeking higher quality to justify spend, with 68% of consumers happy to pay more for higher quality. The shift in attitude away from value-focused thinking has propelled restaurants’ share of occasion by 25.5%, but at the expense of pubs and bars, which have lost share of occasion by 13.1% compared to 2023.
  • The top three increases in dish share were ice cream/sorbet, steak dishes and kebabs, with operators such as Blacklock and Le Bab capitalising on quality-conscious consumers by emphasising locality, authenticity and free-range credentials on menu.
  • The top three decreases were chips/wedges/fries, salads and burgers, reflecting the loss of occasions for pubs and bars and consumers’ desire for quality.

Routine solo dining is growing at the expense of family occasions

  • Solo dining occasions are up 31.4% (+1.1ppts), while family occasions are down at 25% (-1.3ppts), indicating habitual routines as key reasons for dining alone and financial uncertainty impacting family occasions.
  • Family focused promotions are noted as a key strategy to boost trade, with the likes of The Real Greek and Bella Italia offering either free or discounted children’s meals to help alleviate financial pressures and attract families.

A return to pre-pandemic behaviours is stimulating growth in city centre and high street occasions

  • City centres and high streets are benefitting from consumers’ return to pre-pandemic lifestyles, with spending up by 4.8% in high streets and 4.3% in city centres. This change comes at the expense of both residential areas and industrial parks, which have both dropped in share.
  • Operator expansion plans are reflecting high street and city centre growth, with groups such as Flat Iron expanding their London estate with two new outlets and a debut in Manchester, with further sites under consideration for 2024 and 2025.
Christmas in Foodservice

Targeting nights out with friends and boosting social media presence were key to driving Christmas occasions in 2023

  • Both penetration and frequency were up compared to Christmas 2022, with penetration rising by +4.8ppts and frequency 0.7%. Improvement in the reliability of railway transport helped boost these metrics, with dinner occasions up by +3.9ppts, and restaurant and QSR share both rising by 0.9ppts compared to 2022. However, this increase in share led to a decrease in share for pubs and bars, with their channel share decreasing by -1.9ppts.
  • The 18-24-year-old and the 65+ age group both buoyed up Christmas 2023, with these demographics up by +1ppt compared to the rest of 2023. And friend occasions were the top over-indexing group at 18%, in comparison to other occasions such as after-work drinks (7%), celebration (5%), and night out (5%), when compared to the rest of 2023.
  • Megan’s reported their most successful Christmas to date, with 19.3% like-for-like growth. The key drivers were streamlined operations, a festive menu & party venues, all-day offerings, and estate development. With a heavy social media presence that highlighted both corporate and Christmas party offerings, Megan’s were able to drive attendance and maximise profitability during the Christmas period.

Use of premium ingredients within reimagined classics are essential for highlighting quality and helping consumers justify spend

  • Over Christmas, consumers placed more emphasis on quality, with consumer psychographics showing a decrease of 2% in value-led consumers and an increase of 2% in quality-led consumers. And, importantly for our clients, brand-led consumers also increased by 1%.
  • Premium ingredients can enhance quality credentials and help customers justify their spend. Operators are highlighting key quality ingredients, such as ASK Italian emphasising the ‘fiery ‘Nduja’ in their King Prawn and ‘Nduja Risotto, and Prezzo highlighting the quality of their Truffle Gorgonzola Beef Burger by specifically naming the Gorgonzola – ‘Gorgonzola Dolce DOP’ – in their menu descriptor.
  • Classics with a twist were crucial for Christmas occasions in 2023, with nostalgia and indulgence both key considerations for consumers. Pizza Express elevated their game by premiumising their dough balls to create ‘Dough Balls in Blankets’, Ask Italian included the classic Christmas flavour of orange by offering an ‘Orange Panettone Pudding’, and Hungry Horse offered up a ‘Caramelised White Chocolate & Mulled Cider Gateau’ and capitalised on brand-led consumers with the branded addition of Cadbury Crunchie Inclusions.

Festive cocktails and drinks bundles aimed at friends’ parties were crucial for driving spend during Christmas 2023

  • Over Christmas 2023, the alcoholic drinks share grew by +1ppt compared to the rest of 2023, with beer up by 57%, wine by 26% and cocktails by 9%.
  • Introducing festive cocktails was one way operators looked to tap into premiumisation, with groups such as Franco Manco leading the charge in 2023 with ‘The Franco Nutcracker’, an utterly indulgent cocktail including Frangelico hazelnut liqueur mixed with cream and milk infused with cinnamon and nutmeg, topped with whipped cream and a dusting of cinnamon.

For more insights be sure to keep your eyes peeled for our next quarterly update, but until then, head over to our Instagram to check-out our latest insights.

A huge thank you and congratulations to the Lumina team for delivering yet another insightful and wonderfully presented session.