In our final chapter, we’re going to take a look into the crystal ball of Foodservice, starting with changes we can expect in the short-term consumer habits changes through to some longer term, structural changes for the sector more widely.
Keeping it simple: how food habits are changing
We have seen a number of coping strategies due to pressure on consumers’ purses. We have seen OOH food consumption meals take priority over snacks, and OOH used as weekend food – potentially as a treat – rather than during the weekdays. And we’ve seen consumers downtrading to QSRs.
A different response we saw in France as a response to rising prices is simplification in bakeries and sandwich shops.
Consumers are less likely to buy a sandwich with other items such as a drink or a dessert, sticking instead to the staple item. OOH occasions are featuring less products as a result.
Meal replacement as a trend
With a concerning economic climate, some consumers are having to cut back entirely.
In Brazil, for example, prices have risen sharply. We compared prices in Q1 2020 to Q2 2022 and the price of sandwiches has risen 35% in Brazil, biscuits are up by 34%, and sweets and chocolates are both up by 23%.
This has led to a drastic shift in eating habits: Brazilians are having snacks instead of full meals at lunch occasions.
We would describe this as the ultimate downtrade: consumers aren’t downtrading their occasion, their channel or even their menu, but substituting a full meal to a single snack to manage such steep price increases.
As is evident in the graph, this is changing the attitudes to meals vs snacks in the country, where snacks are now, in 2022, seen as far more important than meals (where we saw the reverse story in 2020).
Amidst rising costs, such drastic action is likely to become more widespread.
Both this and the response example in France show that the foodservice industry needs to keep a close eye on changing consumer behaviour. These two examples are different reactions to the same issue of rising costs. Having country-specific and channel-specific data, as well as tracking behaviour across your own footprint, will become increasingly important in order to hit consumer needs.
Meal delivery: more than a moment
When we look at Ecommerce in grocery more widely, we see a return to ‘normal’ habits. The pandemic, as we know, caused many consumers to seek grocery delivery options, as they were more nervous to shop instore for hygiene and Covid transmission reasons. But we see that this spike in online grocery consumption is regulating – particularly when we look at figures from Europe.
Ecommerce had a share of over 14% during the peak of the pandemic. In Western Europe, e-commerce has now dropped to below 10% of total FMCG value sales.
We would expect, perhaps, to see meal delivery follow a similar trajectory. But post-pandemic, meal delivery continues to grow in buyers and frequency. In fact, meal delivery is still at 24% of all Freshly Prepared Meals.
Why is this? We surmise that it is because the service has changed buyers’ perception. Originally a treat or reward, the pandemic caused more consumers to explore meal delivery as more of a standard meal option – and a stand-in for cooking. It seems that this perception has stuck with consumers, as we don’t see a return to our pre-pandemic ‘normal’ as we do in Ecommerce grocery.
There is huge potential here for Foodservice – and we expect to see this trend grow. With fast delivery and ‘everyday’ style menus (rather than a focus on ‘treat’ food) Foodservice can capitalise on consumers appetite for ease.
Foodservice outlets will also win out if they make every step of the customer journey simple and low-cost: from WhatsApp ordering through to loyalty schemes and free delivery, we expect to see growth in this area.
Competition is hotter than ever in Quick Service Restaurants
In Foodservice, the first thing to say is that there will be more competition in the sector than ever. In the chart on the right we look at two major QSR chains across three different markets, to depict changing buyer loyalty.
As you can see, loyalty is harder and harder to garner. Across the three markets, the number of buyers choosing to visit both chains is growing. The chain in yellow is the number one chain – and this is also losing exclusive buyers. This means that the spend per consumer in a given outlet will generally drop, as their spend is split across different outlets.
For QSR, understanding consumer behaviour will be key, in order to keep loyalty figures high, and to build strategies for enticing new shoppers. Penetration drives value growth – so that is where brands should focus their efforts. The QSR channel would do well to reinforce Eat In occasions – particularly in Europe where we see this area at its strongest in terms of recovery.
QSR ultimately over indexes on non-traditional consumer platforms, such as take away and meal delivery – whereas Full Service Restaurants and Bars have gone back to their pre pandemic, on-premise levels quicker. This could open up the QSR channel to risk. We’re now more likely to see riders waiting to pick up orders than consumers lining up to eat out.
By focussing on the eating experience and creating rewards for eating in may be a way to win over more buyers. Consumers will only get more choice as the Foodservice market becomes more crowded and loyalty becomes harder to win, so tactics like this could de-risk the future for QSR.
A tough future for
Of course, there will also be many pressures facing shoppers in the coming months and years. Inflation is a global problem, and the price increase will inevitably force up prices. At the same time, there is a pressure to increase salaries or face losing personnel – both of which are tricky in a landscape where gaining shoppers is harder than ever before.
These pressures will be felt most by independent bars and restaurants, who face the above as well as battling with the growth of chains and QSR – all amidst a year on year drop in value share in Horeca.
When we compare the independent outlet share to the market share of chains, we see that there is a more balanced picture of market share in Great Britain, where recovery is more split across the sector, with 44% of Horeca value coming from chain restaurants and 56% coming from independents.
This risk is even higher in France and Spain, as markets who index most highly on on Independent restaurants.
Looking at the past two years of change in the sector, we expect a lot more disruption to come.
As financial situations change, we expect new ways that consumers are being savvy with their funds – all while enjoying what the Foodservice industry, and the OOH eating experience has to offer.
We expect new innovations, new types of eating experiences, and a continued battle for that all-important customer loyalty (one that is getting harder and harder to win!).
Will QSR open up to the in-person experience? Will independents find a way to win out? Where will meal delivery take us next?
Get in touch and find out.
