Global information company The NPD Group says visits in the British out-of-home (OOH) or eat-out foodservice market will slide in 2019 and 2020. The market peaked at 11.35 billion visits in 2017 but dropped – 0.5% to 11.29 billion in 2018. Despite population growth of +0.6% per annum, there will be a further drop of -0.5% in 2019 and another -0.1% in 2020 to reach 11.23 billion visits. However, NPD is predicting a +5.0% increase in spend to £59.47 billion by end of 2020, against the £56.62 billion for 2018. This will be mainly driven by operators increasing menu prices as they respond to cost pressures, including inflation. The average individual cheque reached £5.00 in 2018 and will rise an additional 5.6% by 2020 to £5.30.
On-premise under pressure
A key trend in British foodservice is the decline of the on-premise sector (food and drinks consumed where purchased) versus off-premise (delivery, takeaway / grab ‘n’ go and drive-thru). This is the result of the long-term decline in retail footfall as more shoppers purchase online. The on-premise market peaked at 4.58 billion visits in 2016 but dropped in the two years following. It will lose a further 8% by end 2020 (vs. 2018) to reach 4.02 billion visits. On-premise spend will increase marginally – but mainly as a result of operators increasing menu prices.
Modest growth for takeaway and grab ‘n’ go; fast growth for delivery
NPD is predicting a better performance in the off-premise sector. NPD forecasts off-premise visits will reach 7.21bn visits by end 2020 (4% higher than 2018), while spend is forecast to jump +10% to £27.87 billion. Because takeaway and grab ‘n’ go currently contributes such a high percentage of off-premise visits (83%) even low growth makes a difference. NPD’s forecast is for takeaway and grab ‘n’ go visits to increase by 1.6% and spend to go up 6% by end 2020. NPD says the industry will also ramp up delivery and invest in drive-thru as an additional way of responding to the decline on the high street. NPD’s forecast is for consumers to spend 22% more on delivery by end 2020 to create a delivery market worth £5.8bn annually. The number of delivery visits will jump 17% by end 2020 to reach 882 million. The delivery market currently accounts for 13% of all off-premise foodservice visits but by end of 2020 delivery’s share will have increased to 15%. By 2020, delivery could comprise almost 10% of spend in the total British out-of-home (OOH) or eat-out foodservice market, piling additional pressure on operators that rely heavily on on-premise visits.
Drive-thru: small but growing
A recent trend in the off-premise sector is the growth of drive-thru. By the end of 2018, it still only represented 6% of the off-premise market in visit terms but is forecast to grow by +60m visits, or +14% by 2020. NPD estimates there are now close to a thousand drive-thru outlets in Britain as operators continue to diversify their store estates away from the high street and find other locations that consumers frequent.
Dominic Allport, Insights Director with The NPD Group, said: “The pressures affecting on-premise eating and drinking is a big theme in British foodservice. The old habit of going shopping and finding a place to sit down and eat is on the wane as more people shop online. We are predicting that all the meaningful growth in foodservice will be ‘off-premise’ and this is where the industry will address the decline on the high street. We forecast that the modest growth in the large takeaway and grab ‘n’ go channel, supported by the continuing delivery revolution, is enough to provide 85% of the growth in spend over the next two years for the entire British foodservice industry. The growth of drive-thru is part of a trend towards more convenience and a result of consumers spending less time on the high street. But operators must address the big price gap between on-premise versus off-premise. The average on-premise cheque of £7.17 is nearly twice the £3.66 seen for off-premise purchases. Is that good for the industry?”
QSR as big as ever
The established trend of consumers trading down to cheaper eats when eating out is forecast to continue. The QSR channel that includes well-known burger and bakery chains is expected to attract 41 million more visits each year by the end of 2020 to reach nearly 6 billion visits annually, representing more than 53% of the entire British foodservice industry in visit terms. NPD’s forecast is for QSR to attract £1.53 billion more spend by end 2020 to reach £24.6 billion.
Casual dining still a winner
Casual dining will also see strong growth in visits and spend. By end 2020, it will be attracting an additional 43 million visits to represent 5.5% of all OOH visits, while spend will jump +15.5% or some £960 million. By contrast, full-service restaurants will continue to decline with a loss of 63 million visits, a drop of -9.3%. Similar to their QSR cousins, casual dining operators have been quick to expand into delivery. All leading casual dining chains are benefiting from this move into delivery, as well as an emphasis on product and service quality.
App-based orders to nearly double by 2020
Visits originating digitally – meaning customers using digital kiosks or order screens in a foodservice outlet, or ordering online or via apps for delivery or takeaway / grab ‘n’ go – will exceed 1 billion per year for the first time by end of 2020. The use of apps in particular is expected to continue to see a rapid increase in use, with visits that originate from an app (both click and collect and delivery apps) forecast to leap by 88% between now and the end of 2020. If app-based orders perform as predicted, they will have grown 2.5 times in visit terms since the end of 2017.
Dominic Allport, insights director with The NPD Group, said: “Our forecasts indicate that any future growth in foodservice visits will be overwhelmingly tech-driven. Operators have realised that the full-scale implementation of digital order channels which offer a combination of convenience, engagement and new experience is a pre-requisite for survival and growth in a sluggish, over-supplied market.”