As inflation eases and consumer confidence improves, Lumina Intelligence senior insight manager Katie Gallagher sees a return of consumers to the market – with a skew towards drinks
Inflation continued to decline in July, August, and September (Q3) alongside an improvement in consumer confidence and household spending power year-on-year (GFK, Asda Income Tracker). Eating and drinking out market penetration increased +7ppts year-on-year in the quarter, with Q3 2022 thwarted by record low consumer confidence and increasing economic uncertainty at the height of the cost-of-living crisis.
There were more consumers participating in the eating out market in Q3 2023 though the additional occasions more skewed towards drink-only occasions. Drink-only occasions are the only daypart to gain share year-on-year, driven by greater numbers of commuters and travellers. More consumers out and about has seen a realignment in day-part shares with drink occasions increasing among both those seeking an affordable treat and a work commute necessity. The return to more normal routines has also driven shifts in reasons consumers are eating or drinking out of home with ‘its part of my routine’ seeing a notable uptick this year. Greater numbers of commuters and travellers has resulted in Costa Coffee achieving a share boost at a total market level of +0.7ppts, most pronounced at lunch (+0.9ppts).
More consumers in offices this year and growth in high street footfall has driven an increase in consumption in high street and city centre locations. High street and city centre are the most visited outlet areas (34% and 18% of occasions, up year-on-year). Improvements in occasion share around high streets and city centres has been hard fought for, with operators facing rail disruption and strikes, which are expected to continue into the festive season in 2023.
Food to go and coffee shop operators can capitalise on growth by offering loyalty schemes in these locations to meet demands for value and remain competitive where competition is greater. Familiarity and proximity have grown at a total market level as reasons consumers choose a specific venue, with consumers having been to a venue before or a venue being close commanding a higher number of occasions as consumers look for something trusted and quick.
At a channel level, pubs & bars achieved the most notable share growth year-on-year (+1.3ppts) as consumers opted for affordable drink-only occasions. Growth in pub share of occasions has been driven by an unpick in consumers going to the pub for just a drink (+4.8ppts). As service-led operators continue to navigate rising costs, high food and drink inflation and financially stringent consumers, it is notable that dinner has failed to gain market share year-on-year whilst the proportion of consumers opting for pubs & bars, QSR or restaurants for a dinner occasion has declined year-on-year. Restaurants gained +0.3ppts in share though against a weak 2022 negatively impacted by the height of the cost-of-living crisis. Value is less important at lunch and dinner with those very value conscious trading out of the market at these more expensive day parts and attention shifts to vouchers and loyalty cards.
October consumer confidence figures have taken another nosedive back down to -30 whilst inflation has remained stagnant at 6.3%. The volatility month to month re-enforces the challenges faced by operators in a market navigating external variables in consumer sentiment and behaviour as well as wider economic shifts. Many operators need a strong festive performance for survival and further government support in the form of business rates relief and rail negotiations are yet to be seen.
