Presented by Peter Backman 7 March 2018 Exploring opportunities in the UK Market UK Foodservice Market – Overview and Trends
Presented by Peter Backman
7 March 2018
Exploring opportunities in the UK Market
UK Foodservice Market
– Overview and Trends
At these
levels
• C Suite
• Strategy
• Investors
National and international
2 Investors
3 1 Operators
I enlighten.
Suppliers
Key topics
• Overview of foodservice in the UK:
• Size
• Structure
• Routes to market
• Trends
• Demonstrate what is available:
• Data
• Insight
• Understanding
Foodservice in the food selling context
Retail 72%
Institutions
Foodservice
(inc Institutions) 28%
Total Food and Drink: £155 billion in 2014
Foodservice • Restaurants
• Quick Service Restaurants
• Pubs
• Hotels
• Leisure
• Staff Catering
• Health Care
• Education
• Services
Retail • Mults
• Independents
• C-Stores
• Off Licences
Institutions • Schools
• Hospitals
• Universities
• Military
• Prisons
Source: IGD, Market Structure and Trends 2014
Different sectors - different customer needs
• Quick Service Restaurants • Pubs • Restaurants
• Hotels • Leisure
• Staff Catering
• Health Care • Education • Services
• Destination outlet – Primary
need for customers going there to eat
• Eating is not main reason for visit - Secondary need is to eat whilst there
• Eating is not main reason for
visit – Tertiary need. Low costs are a key driver
Sector Customer need
Contract Catering – an overview
Staff
Catering
Examples
• Attractions
• Wimbledon
Examples
• Canteens
• Government
Leisure
Examples
• Hospitals
• Care homes
Health
Care
Education
Services
Examples
• Armed Forces
• Prisons
Examples
• Schools
• Universities
Contract caterers
The UK foodservice market – Food purchases
£0
£1
£2
£3
Restaurants QSR Pubs Hotels Leisure Staff
Catering
Health care Education Services
Fo
od
pu
rch
ase
s (£
billio
ns)
Source: Market Structure and Trends
Primary need
Secondary need
Tertiary need
Dark: Group
Light: Independent
0
400
800
1,200
1,600
2,000
£ F
&B
Sa
les
£ M
illio
n
The Top 15 Players • These companies represent 36% of
the F&B sales of the total market • Global players dominate with 5
players • UK Pub Groups follow with 4 players
Source: Key Brands
Fastest growing small brands % growth in estate numbers – 2014-2017
Rank
(Nov 2016 in
grey)
Brand Type of offer Estate - Number of outlets Growth rate (%
change in outlet
numbers 2014-
2017)
2017 2016 2015 2014
1 15 Black Sheep Coffee shop 19 13 4 2 850%
2 42 7Bone American barbecue casual 8 2 2 1 700%
3 3 Mi Casa Burritos Mexican burrito quick service 6 6 4 1 500%
8 Synge & Byrne Coffee shop 6 6 3 1 500%
5 4 Thaikun Thai casual dining 11 8 6 2 450%
6 5 Sprinkles Gelato Ice cream quick service 16 11 6 3 433%
7 7 Bea’s Patisserie quick service 5 5 1 1 400%
13 Taco Bell Mexican burrito quick service 20 11 7 4 400%
9 9 Patty & Bun Burger fast casual 9 6 3 2 350%
10 20 Churchill’s Fish & Chips Fish & chips quick service 13 8 3 3 333%
What is a One To Watch
brand?
• Restaurant/QSR
• 5-25 sites • >20% growth over
past 3 years
Who decides? Who influences? • Customers
• Individual
• Party
• Independent operators • Chef
• Owner
• Cash & carry visitor
• Group operators • Unit? Head office?
• Development chef
• Ops
• Marketing
• Buyers
• Committee? Individual?
• Contract caterers • Contractor
• Purchasing consultant
• Client
• Customer
• Cost sector • Chef
• Head teacher
• Parents
• Pupils/Patients/Prisoners
• Buying consortia
• Distributors • Buyers
• Marketing
• Sales
• Logistics
Operators spend £17 billion each year on …
Food
Cold drinks
Non-food consumables
Equipment
Source: Horizons
Food: £11.1 bn
Source: Market Structure and Trends * Flash estimates
Food: £11.1 bn
Ambient
Chilled
Fresh
Frozen
At what temperatures do operators buy food?
Source: Horizons
Source: Market Structure and Trends * Flash estimates
Food: £11.1 bn
Where do operators buy their food?
Source: Horizons
Source: Market Structure and Trends * Flash estimates
Delivered Wholesaler
Contract Distribution
Cash and Carry
Others inc Retail
Regional Distributors * Examples • Creed
Routes to Market – a summary
Independents Groups
Suppliers – Manufacturers – Primary Producers – Importers etc
National Distributors Examples • Bidfood
• Brakes
Examples: • Keystone • Bidfood Logistics
Delivered
Wholesale Cash &
Carry Contract
Distribution Retail /
Other
Examples • Supermarkets • Wholesale
markets
*Some regional distributors are
part of Buying Groups / Consortia
such as Caterforce
Examples • Booker • Bestway
Source: Market Structure and Trends
• Fragmented
• Top 3 have 48%
• Brakes
• Bidfood
• Booker
• The next 6 have 13%
• But
• Sector/temperature concentration
Brakes
Bidfood
Booker
Country Range
Caterforce
Reynolds
JJ
Fairfax
Fairway
Other contract
All Others
The major players in food distribution
The Foodservice Universe
Top Trends to look out for
• Street food
• Breakfasts
• Coffee (not just in coffee shops!)
• Lunchtime price points
• Meal Deals
• Personalisation
• Grab ‘n’ go
• Fast service techniques
• ‘Health/lifestyle’ options, especially Free From and Provenance
• Vegan, vegetarian
• Use of technology for marketing, service etc.
• Delivery
Almost unbroken upward trend in food sales
value
0
5
10
15
20
25
30
35
40
£ B
illio
ns
Food sales at current prices 1981 - 2016
4.7% CAGR
Source: Market Structure and Trends
-12
-10
-8
-6
-4
-2
0
2
4
6
8
10
J A J O J A J O J A J O J A J O
2014 2015 2016 2017
Ba
lan
ce
of
po
siti
ve
an
d n
eg
ative
re
spo
nse
s
(%)
Consumer confidence
£20,000
£22,000
£24,000
£26,000
Real median earnings
Historical
Forecast March 2016
Forecast November 2017
The consumer is reluctant
Sources: Eurostat, OBR, IFS
Less to spend
Less confident
Overall eating out – pointing downward
90
95
100
105
110
Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar
2017 2018
Tracker Tracker
Tracker Tracker
Trend with 3 month forecast
(polynomial)
In development
Multiple sources eg
• NPD CREST
• Consumer confidence
• BRC
• Coffer Peach Tracker
• Markit Services Purchasing Outlook
• Asda Tracker
• Etc
Source: Peter Backman
Margins are being squeezed – returning to 2010
Source: ONS, Peter Backman
-10%
-5%
0%
5%
10%
15%
JMMJ SNJMMJ SNJMMJ SNJMMJ SNJMMJ SNJMMJ SNJMMJ SNJMMJ SNJMMJ SNJMMJ SNJMMJ SNJMMJ SN
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Margin squeeze
Input prices
Output prices
Casual dining Healthy
Fast casual
Breakfast
Some growth sectors
Lunch
Coffee Shops
Changes to operating patterns
• Reduced need for restaurant
space
• Distribution becomes efficient
• More “Dark kitchens”
Delivery – a 2 way disrupter
Losing contact with the customer
• “Man on a bike with a bag”
• Not “like real life”
• Not always “immediate”
• Impact on the brand?
Delivery in total … and share of total foodservice
Market size in 2017
£6.7 billion
Growth since 2011
+8% CAGR
Forecast market size in 2018
£7.5 billion
4 models: Share of system sales 2017
Traditional pizza Traditional independent
Aggregator Aggregator deliverer 0%
20%
40%
60%
80%
100%
Delivery share of total value of
foodservice: 2017
Non-
commercial
sector
Rest of
Commercial
sector exc
Delivery
Delivery
Source: Peter Backman
Note: Values are at nominal operator
selling / consumer buying prices, or
aggregator sales prices
Note: Brand logos are shown as
examples only
Note: Commercial sector: restaurants,
quick service, pubs, hotels, leisure. Non-
commercial: staff feeding, institutions
* Flash estimates
How will Brexit play out in foodservice?
The unexpected – is very
likely
“No battle plan survives contact with the enemy”
Helmuth von Moltke
Danger of arguing from
“known knowns”
• Time scale • Medium term to March 2019:
• Brexit negotiations
• Long term: • The next 15 years
What happens to:
• Immigration
• Falling / volatile £
• Consumer confidence
• Brexit-induced effects on the UK economy
• Government investment
• Trade arrangements
• Changes in food law / regulations
• Changes in duties / taxes
• Private sector investment in foodservice
• London
• Foodservice trading
Opportunities for exporters
• Offer advantages:
• Price
• Quality
• Consistent supply
• Take advantage of new taste / product trends
• Follow your national restaurant chains into the UK
• Bring another “dimension” of understanding – new ideas
Thank you
T: +44 (0)844 800 0456 M: +44 (0)7785 242809
Tw: @PeterBackmanFS
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