Who will win as the food-to-go market recovers?

Closely linked with commuting, leisure travel and lunch breaks away from home, it’s well documented that food to go has been hard hit in 2020, as consumers largely stayed close to home. According to the recently released Lumina Intelligence UK Food to Go Market Report 2021, the market declined by -45.5% in 2020. This represents a slight outperformance vs. the total eating market, which declined -48.6% in the same period. This reflects the fact that food to go was slightly more immune to the pressures of the pandemic, with key channels such as quick service able to trade through the restrictions, as well as food to go’s advantage as a lower-cost occasion.

Costa Coffee and Greggs were amongst the strongest performers in the sector, gaining share of +0.9 percentage points (pp) and +0.5pp respectively. Costa saw a boost in food to go sales, due to severely limited on-premise consumption, with coffee as a category a strong performer for food to go, accounting for half of drinks occasions. Coffee did see some growth in delivery, but it remains highly experiential and less well suited to delivery, due to its low-ticket price making delivery fees unattractive, as well as high risk of spillages – driving consumers to venture out for coffee on the go occasions. Indeed, the concept of a ‘coffee walk’ was born in 2020, with 13% of consumers starting this habit during the pandemic, rising to 23% for 25-34-year-olds.

Both Costa and Greggs boosted their estates through 2020, both targeting car-accessible, suburban sites. Costa added 58 outlets in the year and Greggs added 28 – somewhat less than its pre-pandemic target of 100 sites a year due to subdued trading. Heavily reliant on food to go sales – accounting for almost two-thirds of turnover – Greggs saw FY 2020 sales fall by over -30%, however this was well ahead of the market, reflecting its lesser reliance on office workers and city centre locations.

Whilst both Costa and Greggs offer delivery, it remains a limited part of the mix, particularly in comparison to fast food players, which in many cases were able to redistribute lost food to go sales. KFC for example has seen delivery increase from just over 10% of its sales mix in 2019 to over half in 2020. This strategy has paid off, with total sales for the brand falling just -2.0% in 2020 – whilst food to go sales fell by almost -50%. Delivery is expected to re-base somewhat in 2021, as on-premise re-opens. Traditional fast food dominated the delivery channel in 2020 as Brits sought to get their fast food fix through whichever channels were available.

Those operators particularly exposed to a lack of office worker footfall identified new routes to market through omnichannel trading. Pret for example fell out of the top 10 ranking for food to go sales but has fought hard to stay top of mind for consumers. Whether through its industry-first coffee subscription; retail lines including coffee beans and more recently bake at home croissants; or emerging plans for a loyalty app – Pret has consistently innovated.

Looking forward, what can we learn from the challenges of 2020 as we move through 2021?

Where an operators’ sites are located has been a huge determinant of success, or otherwise, in 2020, with highly city centre (especially central London) exposed operators faring the worst and those with more suburban and car-accessible locations proving to be more resilient. Property strategies will have to evolve based on where consumers are, which will depend on how quickly domestic and international travel bounces back, and how work patterns evolve in the medium to long term. Outlet growth is expected to accelerate, driven by greater availability of property and more affordable rents.

In terms of channels, the sandwich & bakery and coffee shop/café segments are expected to remain most popular, with a wider physical presence in the regions, city centres, and a growing focus on drive thru sites. Foodservice specialists are expected to take further market share away from retail channels such as convenience stores.

Despite post-pandemic challenges with a shift towards more hybrid work patterns, food to go remains resilient and well-placed to cater to consumers’ need for convenience and affordability. The acceleration of digital will also be a legacy of the pandemic, offering efficiencies and driving spend, as well as yielding valuable customer data.

However, weaker cash reserves and competition from delivery will put some operators under increased pressure, limiting innovation and/or driving prices up, ensuring that in 2021 and beyond – as for 2020 – there will inevitably be losers as well as winners as the market recovers.