The eating-out sector is set to return to growth this year, but operators must decide how to adapt for the new customers who will return.
That’s according to NPD Group, which believes the sector will move from the “new normal” stage, when consumers adjust to the economic downturn, to the “big turn” phase, when recovery begins to take hold.
Paul Pendola, client development for UK foodservice at NPD Group, told M&C Report that there were 90m fewer visits to the industry in 2011, or one and a half fewer visits per person.
However, there were 50m more visits to quick service outlets. Overall the industry recovered 14m of those 90m lost customers last year, and there’s expected to be growth of 1-2% per year between 2013 and 2015.
“Many of these other channels - pubs, fast-casual, cafe/bistros - are still in decline and yet overall the industry will be in growth this year.
“People are trading back. The big question is who is going to win the consumer back and will they be able to retain them?”
He said some of the behaviours among consumers that developed in the ‘new normal’ phase “now feel normal”.
“I don’t think anyone should assume the industry will go back to where it was, and operators are going to really need to consider how they are going to position themselves for the new customer.”
He said a by-product of recession is that not only that customers have changed, “the industry has fundamentally changed”.
“Consumers have options they didn’t have five years ago. When they come back to the high street it looks a little different than it did five years ago.”
Pendola said one casualty of the new normal phase was a decline in lunch sales. But he added: “We are starting to see early signs of lunch recovering, primarily with quick service. Going forward we should see some recovery with lunch day part.”
Breakfast sales grew 8% last year, while morning snack sales were up 1%. “A number of operators are going to put their focus on breakfast offerings. There may be more entrants in the breakfast market.”
He said the morning meal is more affordable and it’s increasingly become a “necessity” to buy out of home.
“It will be one of the first day parts to help drive the industry forward.”
There were signs of recovery among family dining, Pendola said, adding: “I would expect to see more focus on families in the coming year.”
Fast casual
The fast casual sector is “poised for rapid growth”, Pendola said.
Growth among fast casual restaurants grew 5.5% last year, an acceleration of the 3.5% average annual growth over the proceeding three years.
He pointed to the overhaul and upgrading of fast casual outlets in recent times, such as Greggs’ café concept Greggs Moments.
“This fast casual sector is poised for rapid growth. As the economy improves we’re going to see more operators launch fast casual [brands].”
Pendola also highlighted the trend for premium quick service concepts from the US such as Five Guys, which is set to arrive in the UK soon, and Chipotle, the US-based burrito concept that’s expanding in Britain.
“I think we are seeing these premium quick service concepts opening up rapidly. It seems consumers are responding favourably to this.”
He pointed out that fast casual is worth 6% of the £3bn food service market in the UK, a higher proportion than in the US (4%).
Price
Price became increasingly important to customers during the new normal stage, but operators must now focus more on value with price alone likely to be less crucial, Pendola said.
NPD research found 13% of consumers listed price as the primary reason for choosing where to eat in 2012, against 5% in 2008. For quick service outlets, the figure increased from 9% to 25% over the four years, and for full service restaurants it went from 10% to 23%.
Pendola said on average about one quarter of diners use a promotion when eating out.
“The big focus since 2008 has been on deals and promotions and price. I think that is going to change now going forward,” he said.
“I think consumers are moving slightly away from price as the focus. I think the operators are going to have to focus more on the value proposition, even if the price is higher.”
He said consumers are “willing to pay more within reason”, “as long as they get some type of value in return”.
“That’s why operators are going to have to focus on something their competitors can’t do and offer something compelling.”
Food price inflation will also cause operators to raise prices, Pendola added, while the recent horsemeat scandal is likely to make customers more discerning about what they eat.
Health
In 2010 just 3% of diners said they select “something healthy and light” when they eat out. The figure increased slightly to 3.5% in 2012.
“We still look for restaurant occasions to be indulgent,” said Pendola.
When asked to define what’s most healthy from a list of 10 criteria, calorie content was chosen at number eight in a survey of consumers. Consumers focused more on food quality, with terms such as “fresh”, “natural”, and on looking for a “balanced meal”.
Pendola said that following the Responsibility Deal, operators need to look at the issue of calories and calorie counts.
But he stressed: “I think their healthy strategy has to be more than calories on the menu boards. Calories are still important but not as important as we may think.”
“I don’t think [calorie counts] are going to have as big an impact as some operators think they will. Consumers are quite intelligent, they’re aware of what they are eating.”
He added: “I think a lot of operators are struggling to position themselves in themselves in the healthy arena.”
