An affordable luxury: Why dessert remains resilient

There’s nothing like an economic downturn to expose the categories most vulnerable to customers tightening their belts.

Shrugging off the past year’s challenges, coffee shops have continued to see strong outlet and revenue growth, according to World Coffee Portal. 

And QSR continues its post-pandemic growth streak, adding £1.8bn in value in the past four years, according to Lumina Intelligence. 

Another category that has been relatively well insulated from the volatility of the past year is ice cream shops and dessert parlours.

Market leaders Creams Café, Kaspa’s, and Heavenly Desserts have accelerated openings – with the latter having recently made its international debut in Canada.

Smaller Italian favourites have followed suit, with Amorino and Badiani Gelato revealing plans to expand beyond the capital this year.

According to Lumina Intelligence’s Operator Data Index, the dessert parlour segment has near doubled its footprint from 2018-2023F, with 289 branded dessert parlour sites in 2018, forecast to reach 430 in 2023F.

“Ice cream accounted for 2.5% of all eating and drinking out market occasions in the 12 weeks ending 14 May 2023,” according to Katie Prowse, senior insight manager at Lumina Intelligence. “In the summer months – the 12 weeks ending 4 September 2022 – occasion share reached up to 3.6%.”

When it comes to dessert parlours, similarities with coffee or QSR have contributed to their resilience. The first is accessibility. As an affordable pick-me-up, customers seem as reluctant to relinquish ice cream as they do their cup of morning coffee.

Secondly, the inclination towards comfort food during hard times has pushed consumers back towards back to their QSR favourites – and also ice cream, which fulfils an appetite for childhood nostalgia.

“Ice cream shops such as Amorino offer the affordable luxury treating occasion so often talked about during times of financial uncertainty,” Kateline Porritt, head of trends at Egg Soldiers, tells MCA. “Low entry price points and short dwell times can promote a high turnover of customers who aren’t committing to spend more of their time or money.”

Ice cream is insulated from not only reductions in discretionary spend, but also rises in bills.

“Singular format and take out establishments have the potential to avoid the full scope of increased bills that other operators are faced with,” Porritt points out. “For example labour costs can be lower without kitchens onsite and seated dining; short and uncomplicated menus of long life (i.e. frozen) food items can keep waste low and supply chains simpler.”

Katie Prowse agrees that smaller operational costs allow both ice cream and dessert parlour operations to remain robust.

“Dessert parlour sites require smaller food-preparation areas, allowing higher cover figures, and often offer cheaper fit-out costs than those associated with restaurants or pubs,” she tells MCA. “In addition to this, the core product offering of these sites tend to be on the more accessible side in terms of cheapness and staff preparation, meaning that margins can be high and staff training and employment costs lower than in other foodservice segments.”

Morris Greenberg, MD for property agents CDG Leisure, adds that low costs and potentially high profits allow for rapid expansion and are attractive from an investment perspective.

“It’s easy to expand quickly as there’s no need for licenses or kitchens or planning, like you would need for restaurants,” he tells MCA. “Rents are lower as well.

“Even in a recession, people will still go out for food – and desserts have become a big part of this mindset,” he says. “This is especially because there are no set times to have dessert – you can go in at any time.”

Also noteworthy is that dessert parlours like Creams and Kaspa’s are often heavy on evening trade as they aim to provide a popular alternative for those who don’t drink. With cafés more centred around the morning and afternoon day parts, the likes of Creams and Kaspa’s fulfil the gap in gathering spaces for some communities.

The market leaders

According to Prowse, the wider market is expected to see outlet growth of +10.5% in 2023F, with players including Kaspas, Heavenly Desserts, and Creams each forecast for robust outlet growth.

Heavenly Desserts accelerated its openings pipeline to 20 stores per year, opened its first central London site, and announced its international debut – all at the back end of 2022. The premium dessert parlour has now proven its concept works across locations from Baker Street to Canterbury and the UK to Canada, alongside hitting the 50-site mark and pushing out its franchise model across the EMEA.

Its ‘neighbourhood model’ ensures the format is tweaked according to location, while a new menu launch introduced ‘dessert tapas’ for customers looking to try a bit of everything. In November, MD Yousif Aslam told MCA he believed this was a first for a dessert café.

Joint MD Mohammed Imran added the brand “prides itself on delivering luxury in both customer experience and in taste.”

While Heavenly Desserts is comfortably ensconced within its elevated positioning, Kaspa’s has more of a value proposition, targeting low-to-moderate income customers such as students and families through its 100+ stores.

“It feels like dessert represents a little treat to many customers and lends quite well to a special occasion,” Kaspa’s MD Francesco Arcadio tells MCA. “Other concepts have seen more of an impact of the crisis, but we have been quite lucky.”

Creams Café, meanwhile, has made moves into new formats, announcing partnerships with Tesco and Park Garage Group in recent months. With 100+ sites – and market mapping showing potential for 500 – the concept has proven itself more than adaptable, from a 50 sq m kiosk in Park Garages to a 200 sq m site within a Tesco outlet.

With investment fund Salonica Maroon recently upping its stake in Creams, the brand is busy ticking off the boxes as it also gears up to go international.

The gelato loyalists

More specialist artisan concepts like Amorino and Badiani are are set to venture out of the capital, with both opening in Windsor in the coming months, and Amorino also lining up Cardiff and Cambridge sites.

“You’ll also see Amorino is established predominantly as a city centre proposition in high tourist areas with other outlets situated in higher affluence areas,” Porritt comments.

While these areas are significantly less impacted by the cost of living crisis, Amorino and Badiani still represent an affordable luxury – despite their positioning as artisan gelato concepts. 

Gelato remains the core offering, but Amorino has taken cue from market leaders and added crepes, waffles, and hot drinks to broaden the range.

Still, its position as the authority on all things gelato has helped, with franchise director Roman Aslamzada telling MCA: “Technically speaking, there’s no direct competition. We’re gelato-based rather than a dessert café.”

Badiani has also launched crepes, waffles, and pinguinos, and gone a step further by adding an experiential element to its offer – gelato tastings with wine pairing – while similarly using its Italian heritage to situate itself as the authority on gelato.

As customers continue to look for experiences, this element could add a subtle point of differentiation amid the gelato world, with smaller emerging brands like Gelatiera and Danieli also on the rise.

The ones to watch

When Filipino ice cream parlour Mamasons first launched, owners Florence Mae Maglanoc and Omar Shah said few were convinced it would work.

Speaking at the R200 Conference earlier this year, they said: “We decided to stick to six Filipino flavours no one’s heard of… people thought we were crazy. Now it’s nice to see that asking for ube is as nonchalant as asking for vanilla or matcha.”

Mamasons now has three sites across London. While the concept would no doubt work in Chinatown, its Kentish Town and Westfield London outposts have evidenced yam - or cheese-flavoured ice cream - is less outlandish than initially thought.

Filipino and Turkish ice cream have created a place for themselves despite the prevalence of more established flavours like matcha.

Japanese-inspired dessert concept Tsujiri, which specialises in matcha sundaes, has six stores across the country, further evidencing that the appetite for global desserts goes beyond London’s Chinatown.

Matcha or ube may still be relatively niche, but with operators continually innovating to provide much-needed differentiation during hard times, the future of ice cream will see the category becoming more global in nature.

“As businesses innovate menus to drive customer interest and expand into as many day-part opportunities as relevant, I wouldn’t be surprised to see a full scope of global ice cream and iced desserts appearing on menus and pop-ups,” Porritt says. “Snacking formats will be great for affordability.”

Greenberg, meanwhile, agrees the category will continue to see strong growth in the future.

“We’ll see all kinds of dessert brands and concepts coming from abroad and entrepreneur’s imaginations.”