As the leading foodservice agency, we are proud members of the Lumina Food Strategy Forum, and as such regularly attend their insight debriefs to ensure we are up-to-the-minute when it comes to foodservice trends. The first of two sessions this week looked at the post lockdown landscape in the wake of Covid and how both  industry and consumer behaviour will be affected moving forward with a specific look at the restaurant sector.

With only 11 weeks of normal trading in 2020 and over 40 weeks of restrictions, including three lockdowns (the most recent impacting the peak revenue time of Christmas & New Year), regional tiers and arbitrary rules like the 10pm curfew and substantial meal rule have seen the industry hit hard, despite the positive impact of Eat Out to Help Out in the summer. Indeed, 2020 saw the total eating out market decline by -48.5%, with almost 4,000 net outlet closures with a market decline by just under half to £47 billion, with retail, travel and leisure declining -46%, hotels, pubs and restaurants suffering the steepest declines at -50% and contract catering declining by -45%. In outlet terms, the eating out market saw the closure of 3,978 sites throughout 2020, the equivalent of -77 sites per week! Despite the support measures for hospitality announced in the budget (including extensions for furlough, VAT & business rates reduction, grants, and a freeze on alcohol duty for 12 months) a recent industry leaders’ poll showed only 38% were positive, with over half understandably expressing that it is still not enough with closures lasting well over four months due to Government restrictions.

As we approach the key staging posts in the roadmap out of lockdown, consumer confidence remains notably dampened compared to pre-pandemic levels and this is expected to translate into more restricted discretionary spending with lower ticket ‘grab & go’ operators doing best, whilst consumers look for promotions and value. Interestingly, however, one impact of Covid has been a boom for local speciality shops such as delis, farm shops and wine merchants, with consumers seeking out high quality produce. Indeed, quality is the top driver for consumers when it comes to eating out at 66.3%, so value cannot be at the cost of quality.

Taking all this into account Lumina have set about modelling scenarios of how the year might pan out. The upbeat forecast includes assumptions around a mid-May opening for indoor hospitality and a stronger second half of the year with few restrictions on household mixing, whilst the best-case scenario sees the market recover to 72% of its 2019 value in 2021. However, they are generally assuming a mid-case scenario whereby hospitality remains closed for indoor until late May and restrictions are relaxed from August. This represents +31.8% growth to 68% of 2019’s value, a total of £61.9 billion. The worst-case scenario however would see the market recover to just 62% of its 2019 value in 2021. Based on the mid-case scenario retail, travel and leisure are predicted to grow: +39.5% in 2021 to 75% of its 2019 value, hotels, pubs, and restaurants to +30.5% and to 66% of 2019 value and contract catering to +15.4% to 63% of its 2021 market value.

Unsurprisingly those operators who have managed to continue trading through delivery and take away will be best placed to bounce back this year. Whilst location will also play a key factor with city centre sites set to struggle until workers return in higher numbers, more local operators and those in staycation hot spots will fare well. Of course, the amount of pent-up demand will be crucial to the recovery of the sector with early signs looking promising based on pre-bookings.

When it comes to pubs, the summer of sport offers a key opportunity for both outdoor and indoor service so getting it right will be crucial. Branded restaurants have seen the rise of medium sized chains like Mogli, Rosa’s Thai, Pizza Pilgrims and The Real Greek, offering more provenance and authenticity, aligned to specific cuisines which appeal to customers far more than the non-differentiated bigger players. These medium sized players are expected to make up 31% share of the branded restaurant market in 2021, with large operators losing share of the market after many have suffered with administrations and CVA processes. Empty properties left by larger competitors will offer an opportunity to attain attractive sites for more affordable rents for these smaller more nimble medium sized chains and will doubtless help them continue their rise.

As mentioned, quality is the biggest driver for consumers and married to this will be delivering an experience that cannot be replicated at home. Getting this right will be the key to success in 2021. As well as continuing to leverage multiple revenue streams set up in lockdown such as fake aways, take away and delivery, all of which have seen a stronger reliance of technology.

The restaurant sector

Turning our attention to the restaurant market and some key findings from Lumina’s recent restaurant report, we have seen a huge amount of agility over the past year, with operators embracing technology to pivot to delivery, at home kits and much more. A couple of the best examples include Hickory and Wing Daddies. The former creating themed ‘at home experience boxes’ including Spotify playlists and branded items to set the scene. The latter moving to dark kitchens and focusing on the items on the menu that travel well (i.e. wings) for delivery.

Prior to Covid restaurants had seen a slight downward trend over the last three years, with the market being worth £19bn in 2019. Last year, lockdown and tier 3 meant restaurants were shut for dine in for around four months, which hit the industry considerably harder than other eating out establishments, as it dipped to £8.6bn. Vaccine confidence is promising, but there is still the risk of a possible surge once lockdown is lifted, especially within the younger age groups who make up the majority of restaurant visits. Some branded restaurants have adapted, and many are rolling out greater delivery offerings, such as Nandos, which has grown the number of sites working with Deliveroo to over 300, while smaller brands including Dishoom have worked on developing sophisticated delivery offerings.

With regard to restaurant menus, we have seen a streamlining of menus to aid back of house delivery and also to suit online ordering platforms, with operators looking to minimise costs and maximise best sellers. This has affected main courses the most with a 22% decrease in the number of dishes, with a marked decrease in sharing dishes due to Covid related concerns. Whilst menu price inflation has remained relatively close to the Consumer Price Index inflation with pubs closing the gap on restaurants when it comes to pricing.

Innovation hasn’t stopped, and restaurants continue to add dishes that cater for dietary requirements. Vegetarian dishes account for 15% of mains, but such entries have declined year-on-year, with the biggest decrease seen in gluten-free and low-calorie dishes. While dishes where a ‘vegan option is available’ and ‘gluten-free option is available’ grew by +58% and +37% respectively, as operators try to cater for every need by adapting main menu items on request. Technology has shot ahead in hospitality due to the pandemic, as has consumer take-up with contactless payment, online and app delivery and ordering platforms, QR codes and self-order kiosks now used by a far wider demographic, forced to change their habits due to the pandemic and their desire to remain safe. This is likely to remain where it offers consumers convenience, but personal service will still be key to creating an experience.

Thanks to Katie and Blonnie for their enlightening presentations. To find out more about Lumina and becoming a Foodservice Strategy Forum member visit  www.lumina-intelligence.com/

 

Susan Wickes
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