The company said that 2013 has not been an easy year for UK consumers and pointed out five key trends: Food remains the primary long term route to sustainable growth in this sector, the market is large but fragmented, leisure spending has been protected, the importance of brands is increasing, significant economic disparities by region and by economic grouping.
With wage rises not keeping pace with the general level of inflation in the economy, discretionary income has remained tight. This economic backdrop continues to drive a challenging consumer environment and ever greater expectations when people do choose to spend their money. It is in this context that we are especially pleased with our financial progress this year. A number of factors are impacting our market’s evolution and we believe will continue to do so:
The market is large but fragmented. The eating and drinking out market is worth £75bn a year and we are one of the largest players in that market with sales of around £2bn, approximately 3% of the total. Our largest brand by sales, Harvester, has just 210 outlets in the UK compared to around 125,000 eating and drinking out venues in total. The opportunity for scale operators to grow by taking market share with leading brands is significant in a market of this size.
The importance of brands is increasing. Although the majority of the industry is unbranded, the branded restaurant and pub sector has consistently grown at a faster rate than the unbranded sector and this has accelerated in the downturn as guests seek the guarantee of quality that a brand can offer. We expect that this trend will continue.
Leisure spending has been protected. Through the downturn, families have tended to protect low ticket leisure spending. Average weekly family spending on leisure increased 4% from 2007 to 2011, whereas overall weekly family expenditure was down 6% over the same time (source: ONS family spending survey 2012).
Food remains the primary long term route to sustainable growth in this sector. We benefit from being principally focused on eating‐out, with around three quarters of our turnover generated from guests eating in our restaurants and pubs. We expect the eating‐out market to grow at least in line with overall consumer spending in future. Even in the structurally declining drinking out market, brands and formats with strong locations, a clear brand proposition and customer focus should outperform.
There are significant economic disparities by region and by economic grouping. Between 2006 and 2012, London, the East and the South East achieved substantially higher economic growth than the rest of the country and this trend is forecast to continue. 45% of our revenues are generated in these areas and we are well placed to benefit from this improving trend.
Different economic groups have also been impacted to varying degrees by the economic slowdown and subsequent austerity measures. Baby boomers and more affluent economic groups have been relatively well protected whereas 18‐34 year olds and the lower income deciles have been the hardest hit. Our brand portfolio is targeted at guests from across a wide spectrum, so it is increasingly important that we focus the business to benefit from these dynamics. We have invested heavily in this area in FY 2013 and our brand teams are now highly focused on the specific market trends which impact their guests.
