Eating-out versus eating-in: The battles to feed us out of home
Food Thinkers at City University Eating-out versus eating-in: The battles to feed us out of home Peter Backman 25 March 2015 What we’ll talk about • To start • • • • Introduction The Foodservice Sector • • • The Foodservice Sector • • • • • The Consumer The Operator The Distributor The Supplier Repacking the sector Cross-sector • Menu developments What’s happening? Key players Wrapping it all up Who am I? • Prehistory • • • RHM Research Food Manufacturers Federation (now FDF) Research and consultancy • • 30 years experience The industry’s leading supplier – and interpreter – of information • Horizons FS - Managing Director • plus ARENA – past Chairman Horizons • Provide information and insight • 100% focused on foodservice and hospitality in UK - and Europe • We work for: • • • • Operators Distributors Manufacturers Investors, service providers Our services Where does our information come from? • 30 years’ exposure to foodservice • Surveys of consumers, operators • Discussions / interviews • Menus • Feedback from conferences • Desk research • Horizons databases • and so on … Some notes on interpretation • Unless otherwise stated: • • • Information is for 2013 or 2014 Values (purchases or sales) are for food Source is Horizons © Horizons The Foodservice Sector How big is foodservice? • Food, drink sales to consumers • £46.6 Bn Excludes drink in Pubs, Hotels, Student Unions etc not served with food • Food sales to consumers £34.5 Bn • Food sales to operators £10.7 Bn • Food shipments £7.5 Bn • It serves 7.9 Bn meals/year © Horizons Foodservice plus retail Total Food and Drink: £155 billion in 2013 Foodservice 28% Retail © Horizons. Source: Horizons with IGD Hospitality market – UK and inbound tourists Worth £119 billion in 2013 Hospitality Foodservice 33% Drink in pubs © Horizons. Source: Horizons with British Hospitality Association A £234 billion market … Hospitality Foodservice 19% Drink in pubs © Horizons Institutions Retail Caterers spend £44 billion each year on… Food Soft drinks Alcohol Labour Disposables Cleaning chemicals Powered equipment Rent/Rates etc All other © Horizons The Consumer You all know … • Changing demographics and lifestyles • We’re getting older • 1.9 million more women than men More - and smaller – households More divorcees More retired people More women in work People are marrying later Women are having children later Not enough children But there are more of us • • • • • • • • © Horizons • Concerns • Ebola • Ukraine • Syria • Terrorism • Immigration Also • Jobs • Available money And • Diet • Obesity • “It’s one damn thing after another” Who eats out? Who is most likely to eat out? 80 75 Percentage 70 65 Equally likely to be: • Male or female 60 55 50 Dec 09 Jun10 Dec 10 Jul 11 Dec 11 Jun 12 Dec 12 Jun 13 Dec 13 Jun 14 Source: Horizons Eating Out-Look June 2014 Most likely to be: • 18-24 years old • ABC1 • Living in London • Full-time student • Never married • With 1 child Frequency of eating out Who eats out most often? Eating out occasions in last 2 weeks 4 3 2 1 0 Dec 09 Jun 10 Dec 10 Jul 11 Dec 11 Jun 12 Dec 12 Jun 13 Dec 13 Jun 14 Source: Horizons Eating Out-Look June 2014 Most likely to be: • Male • 18-24 years old • AB • Living in London • Full-time student • Never married • With 0-1 children Average meal spend £ per head £16 Who spends most on a meal? Average spend per head incl drink (£) £12 £8 £4 £0 Dec 09 Jun 10 Dec 10 Jul 11 Dec 11 Jun 12 Dec 12 Jun 13 Dec 13 Jun 14 Source: Horizons Eating Out-Look June 2014 Most likely to be: • Male • 25-34 years old • C1 • Living in London • Working full time • Married • With 2 children 3 + 1 fundamental reasons why consumers are eating out more Demand side drivers 1. Consumers are increasingly affluent • 2. They have more time • 3. Note: Medium/long term The key issue: leisure time choice Nowadays, consumers eat out as a matter of course Supply side driver 4. Growing choice of places to eat © Horizons Drivers – consumer issues • More change • • • • • Fickle consumers – more choice Changes in lifestyle Demand for “me” More “on the go” Health / wellness / lifestyle • More eating out – in addition to eating at home • Price • Meeting (lower) price expectations © Horizons The Operator Operating sectors • • • • • • • • • Restaurants Quick Service Pubs Hotels Leisure Staff Catering Health Care Education Services © Horizons } • Contract Caterers Restaurants European-Ethnic-Pizza/Pasta-In-Store-Themed • Facts • • • • • 29,670 Outlets 11% of the total 746 million meals 9% of the total Key Issues • • • No change in total importance Casual dining Discounting Source: Horizons Source: Horizons Market Structure and Trends • Operators • • Fewer majors than you think Emerging Ones To Watch Quick Service Fast Food-Cafes-Take Away-Ethnic-Sandwich • Facts • • • • • 32,956 Outlets 13% of the total 2,080 million meals 26% of the total Key Issues • • • • Growing Highly competitive Key market drivers US imports Source: Horizons Market Structure and Trends • Operators • • A handful of large players Emerging Ones To Watch Pubs ”Brewery” owned-Pubco owned-Managed-Tenanted-Branded-UnbrandedFreehouses-Night Clubs-Wine Bars. Excluding: Pub Restaurants • Facts • • • • 43,727 Outlets 17% of the total 821 million meals 10% of the total • Key Issues • • • Declining core business Future of Pub Metamorphosing into restaurants Horizons Source:Source: Horizons Market Structure and Trends • Operators • • • • Pubcos Managed operators Regional brewers Freehouses Hotels Hotels-B&B/Guest Houses-Farms-Holiday Camps-Caravan Parks • Facts • • • • • 45,052 Outlets 18% of the total 602 million meals 8% of the total Key Issues • Asset light / Many “owners” • Diversity of F&B offer • The overseas visitor Horizons Source:Source: Horizons Market Structure and Trends • Operators • • • <4,000 group owned Budget chains 27,600 have >10 rooms Leisure Visitor Attractions-Entertainment-Sports/Social Clubs-Events-Mobile CateringOn-Board • Facts • • • • • 20,078 outlets 8% of the total 522 million meals 7% of the total Key Issues • Generally inexperienced • Growth of sports venues • Low average throughput but … • Unexploited Source: Horizons Source: Horizons Market Structure and Trends • Operators • • Fragmented Some mega outlets Staff Catering Contracted-Self Run-Industry-Commerce-Government-Off Shore • Facts • • • • 17,656 Outlets 7% of the total 768 million meals 10% of the total • Key Issues • • • Contractors dominate Smaller workplaces Competition from the High Street Horizons Source:Source: Horizons Market Structure and Trends • Operators • Contractors Health Care Hospitals-Homes-NHS/Trusts-Local Authority-Private-Contracted-Self Run • Facts • • • • • 32,181 Outlets 12% of the total 968 million meals 13% of the total • Key Issues • 2 sectors: • Hospitals • Care homes • Costs are vital issue Source: Horizons Source: Horizons Market Structure and Trends Operators • • Contractors Trusts Education Primary-Secondary-Tertiary-Contracted-Self Run • Facts • • • • 32,360 Outlets 13% of the total 1,110 million meals 14% of the total • Key Issues • Quality • Costs Source: Horizons Source: Horizons Market Structure and Trends • Operators • • Local authorities Contractors Services Fire-Police-MoD-NAAFI-Welfare-State-Private • Facts • • • • 3,070 Outlets 1% of the total 257 million meals 3% of the total • Operators • • • • • • Key Issues • • Special needs Fragmented Source: Horizons Market Structure and Trends Sector-specific Local authorities Prisons MoD Contractors Contract Caterers Staff Catering-Health Care-Education-Leisure • Facts • • • • 13,690 Outlets 6% of the total 1,336 million meals 17% of the total • Key Issues • • • • • They have clients AND customers Several income streams Changing charge structure Competing on High Street Changing business models Source: Horizons Market Structure and Trends • Operators • • • Top players Level 2 The rest The UK foodservice market - meals Meals served (billions) 2.5 2.0 1.5 1.0 0.5 0.0 © Horizons Source: Horizons Food purchases (£ billions) The UK foodservice market – Food purchases 2 1 0 © Horizons Source: Horizons The UK foodservice market – F&B sales to consumers Food and beverage sales (£ billions) 12 10 8 6 4 2 0 © Horizons Source: Horizons The Caterer is not the same as the Retailer • The caterer is: • • • • Part housewife Part manufacturer Part retailer To simplify … caterers are entrepreneurs • • • • • • Foodservice is a craft Costs of entry are low Caterers talk to their customers at every purchase occasion They are in the hospitality business … not the retail business They don’t operate systems … they fly by the seat of their pants They are driven by satisfying their customers … not by numbers © Horizons Who decides? Who influences? • Customer • • • Chef Owner Cash & carry visitor • Unit? Head office? Chef Ops Marketing Buyers Committee? Individual? © Horizons • Contractor Purchasing consultant Client Customer Cost sector • • • • • Group operators • • • • • • Contract caterers • • • • Individual Party Independent operators • • • • • Chef Head teacher Parents Pupils/Patients/Prisoners Buying consortia Distributors • • • • Buyers Marketing Sales Logistics Decision making in foodservice • Complex • Requires understanding • Needs nurturing • Constant updating • Absence of mass medium Consequently: • Resource hungry • Slow © Horizons The Distributor Caterers spend £16.8 billion each year on … Food: £10.7 bn … plus other, capital items Source: Horizons © Horizons Food Cold drinks Non-food consumables Equipment At what temperatures do operators buy food? Food: Food: £10.1 Billion £10.7 bn Source: Horizons © Horizons Ambient Chilled Fresh Frozen Where do operators buy their food? £10.1 Billion £10.7 bn Source: Horizons © Horizons Delivered Wholesaler Contract Distribution Cash and Carry Others inc Retail Menus And … All Sectors Ave. Price 1 (1) Beef Burger 2 (2) Pizza 3 (3) Chicken Burger £8.35 4 (4) Fish & Chips £9.68 5 (5) Rump Steak £11.61 6 (7) Roast Chicken £10.73 7 (10) Rib Eye Steak £18.52 8 (6) Chicken Curry £9.72 9 (9) Sirloin Steak 10 (11) Sunday Lunch £9.27 £10.53 (12) Grilled Chicken £10.95 14 (15) Pork Ribs £8.06 £13.13 15 (14) Beef Lasagne £8.47 16 (18) Vegetable Burger £7.43 17 (20) Chicken Pasta £9.82 (16) Combo £13.33 19 (17) Mixed Grill £11.05 20 (-) Hot Dog 60 £8.63 £9.75 Sausage & Mash But world cuisines, and “ethics” abound £16.57 11 (13) Chicken Breast (8) The old favourites are still key £6.12 Source: Horizons Menurama Summer 2014 Number of Foodservice Brands Rank 50 40 30 20 10 0 Summer 2010 Winter 2010 Summer 2011 Winter 2011 Summer 2012 Winter 2012 Summer 2013 The offer • Wide choice • • The “aware” consumer • • Sliders, platters, tasters... Innovation • • Provenance, ethics, health... Sharing options • • Cuisine types, independent and brand, informal and formal, price... Caramelised beetroot and squash strudel, Honeycomb cannelloni Premiumisation as an option (as well as value ) • Burgers, luxury fruit breads, Posh fish ‘n chips... Source: Horizons Menurama Summer 2013 Ethical Sourcing, Responsible Production and Quality Assurance Number of Foodservice Brands 70 60 Summer 2013 Winter 2013 Summer 2014 50 Winter 2014 40 30 20 10 0 Note: See Appendix 2 for menus dishes described by term Healthy/Lifestyle Eating Number of Foodservice Brands 80 ‘Healthy/lifestyle’ factors Dietary requirements 70 60 50 40 30 20 10 0 Summer 2013 Winter 2013 Summer 2014 Winter 2014 Some growth sectors Casual dining Healthy Fast casual Breakfast © Horizons The Supplier What are supplier characteristics? • Retail focused • • Foodservice turnover: • • • • But not all are Less than £200 Million But most are less than £20 Million Above average profitability - sometimes Foodservice resources: • • Limited – people, experience Pressured production © Horizons The personalities Retail Ordered Systems-driven The customer has to work Foodservice Centred on people “Anything else for your meal?” Entrepreneurial The threat from retailers? • They have • The infrastructure • Online • Delivery • • So they can become • • • • • The supply base Cash and carries Delivered wholesalers Standalone caterers Are they already? But do they have they will? © Horizons How do foodservice and retail differ? Retail • • • • • • • • • • • • Impersonal Consumers buy brands Quantum leaps Short term results Systems driven Big turnover Few buying points Mass market Media focus Simple supply chain Long production runs Senior management have experience © Horizons Foodservice • • • • • • • • • • • • Hospitable Operators buy from companies Small steps Long haul Entrepreneurial Smaller turnover Many buying points Bespoke Trade focus Distributors involved Short production runs Senior management have expectations Repacking the sector The Foodservice Universe What’s Going On? A 30 year trend in numbers of meals served Meals served 1981 - 2013 • 10 Meals Billions 8 6 4 2 Popular Catering • • Restaurants, QSR, Pubs 1.4% CAGR 0 © Horizons Total Foodservice Source: Horizons Market Dynamics Toolbox Base year 2010 0.5% CAGR Almost unbroken upward trend in food sales value Food sales at current prices 1981 - 2013 35 30 £ Billions 25 20 15 10 5 0 © Horizons 0.5% CAGR The pain Competition is growing Costs won’t go down Add value Cut costs Maintain margins Fickle consumer demand Government spending less Evolve business models F&B Sales – Forecasts for 2015 at constant prices 3.7% 2.9% 2.4% 2.9% 2.7% 0.8% £14 -1.4% Food Sales £Billion 2015 £12 0.0% 0.3% 0% -10% £10 £8 £6 -20% -30% £4 £2 £0 Source: Horizons Market Structure and Trends -40% -50% F&B Sales Total £47.8 Bn Group +5.6% 2014-15 +2.6% Ind. Sales £Bn Gp. Sales £Bn % change 2014-15 Foodservice in the US and UK 220 200 1981 = 100 180 160 UK USA 140 120 100 Sources: Horizons; NRA Population affect on foodservice growth in the US 220 200 1981 = 100 180 160 USA - Actual USA - Population adjusted 140 120 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 100 Source: Horizons; NRA; ONS; US Bureau of Statistics Population effect on US v UK comparison 150 140 1981 = 100 130 120 UK USA 110 100 90 Source: Horizons Inflation - The Margin Squeeze 15% 10% 5% 0% J A J O J A J O J A J O J A J O J A J O J A J O J A J O J 2008 2009 2010 2011 2012 2013 2014 2015 -5% -10% Margin Squeeze Source: Horizons / ONS Food Prices Selling Prices Discounting is evolving 180 Base = 100 December 2008 160 140 120 100 80 60 40 20 0 M M J S N J M M J 2009 S N J M M J 2010 Sources: Horizons Voucher Tracker 2011 S N J M M J 2012 S N J M M J 2013 S N J M M J 2014 S N Key Players 25 UK Leading Groups 2,000 Beverage not associated with food Pubs QSR Full service 1,500 £ F&B Sales £ Million Includes • Restaurants, QSR, Pubs • UK only • System-wide sales • Groups sales - not individual brands • Beverage not associated with food – only applies to Pubs 1,000 Greene King acquires Spirit 500 Tragus spins off Strada SSP IPO Gondola splits PE, Ask / Zizzi 0 Source: Horizons, Company information Hony acquires Pizza Express TGI sale The next 25 Groups – for context 150 Beverage not associated with food Other Beverage Pubs QSR £ F&B Sales £ Million Restaurants 100 50 Includes • Restaurants, QSR, Pubs • UK only • System-wide sales • Groups sales - not individual brands • Beverage not associated with food – only applies to Pubs 130+ Ones To Watch 0 Source: Horizons, Company information Ones To Watch – October 2014 Rank Brand Type Outlets Growth since 2011 1 Fuel Juice Bars Juice bar 24 16 2 Dunkin' Donuts Bakery quick service 14 14 Abokado Healthy quick service 22 13 Tortilla Mexican Grill Mexican burrito fast casual 20 13 Pieminister Pie quick service 20 13 Boost Juice bars Juice bar 18 12 Chozen Noodle Pan Asian casual dining 12 12 Decks British casual dining 12 12 Five Guys Gourmet burger fast casual 12 12 Farmhouse Inns Pub restaurant casual dining 24 11 Wildwood Italian casual dining 21 11 Brasserie Blanc French bistro casual dining 20 11 Coast to Coast American casual dining 12 11 El Mexicana Mexican burrito fast casual 12 11 3 6 10 Source: Horizons Ones To Watch October 2014 What is a ‘One To Watch’ brand? • Restaurant/QSR • 5-25 sites • >20% growth over past 3 years In short … • Lots of options • Big players are too big to ignore • • • That’s why everyone goes after them That’s why they can demand best price But compared with retail • • • Small Fragmented They’re all different ... even if they look the same © Horizons Wrapping It Up What have we learned? © Horizons How to contact me Horizons Winston House 2 Dollis Park London N3 1HF T: +44 (0)844 800 0456 M: +44 (0)7785 242809 E: peter.backman@hrzns.com Tw: @PeterBackmanFS www.hrzns.com
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