After years of new openings, casual dining has been under the spotlight for closures in 2019. But where does the sector really stand now? CGA’s Business Unit Director for Food and Retail Karl Chessell shared the most important trends and developments at the Future of Finance conference—and here are some of the key messages.
1. Eating out frequency is holding up
People aren’t rushing out to eat more often in 2019—but neither are they staying in. CGA’s BrandTrack survey in April 2019 found that exactly half (50%) of consumers eat out at least weekly—up slightly on the figure from 12 months earlier (47%). “The demand is still there,” said Karl Chessell at Future of Finance.
2. Managed restaurant sites have peaked
Media narratives about casual dining have focused on closures lately—but the sector isn’t exactly in freefall. In the 12 months to the end of March 2019, managed restaurants—those run by operators with more than one site—were in outlet decline of 1.1% year on year—equivalent to six net closures a month. “The decline so far is modest—we’re not talking about managed restaurant supply dropping off a cliff,” Chessell said. Where supply figures go next will be revealed by CGA and AlixPartners’ Market Growth Monitor.
3. Sales are lagging the market
The Coffer Peach Business Tracker has revealed 1.7% like for like sales growth for the managed sector in the year to May 2019. But while pubs have enjoyed fair 2.2% growth, restaurants have lagged well behind at 0.7%. Comparable factors and weather have had parts to play in this, but restaurants are finding it tougher than pubs at the moment.
4. There is huge churn
Beneath the headline figures of casual dining closures lies a complex story of significant churn. There have been more than 2,600 restaurant closures in the last year, but 1,880 openings too—and many have been on the same sites. Many of the opening and closure patterns are distinctly regional, which makes identifying the right sites more crucial than ever. CGA’s location planning tools can help.
5. New operators are snapping at big brands’ heels
Back in 2014, CGA’s Outlet Index showed that half (49%) of Britain’s restaurants were operated by brands with more than 100 sites. Five years on, that has fallen six percentage points to 43%. Well over a third (37%) of restaurants are now operated by groups with fewer than 25 sites, but the biggest winners have been those in the middle tier. Brands with 25 to 99 locations, like Wahaca, Five Guys and Franco Manca, have seen their share grow to a fifth (20%).
6. Premium brands are growing fastest
In both drinks and restaurants, premiumisation has been one of the biggest trends of the last few years. Brands classified by consumer spend within CGA’s Outlet Index as premium—like Miller & Carter, Côte and The Botanist—have increased their site numbers by 28% in the last five years. Growth from value brands (12%) and mid-market brands (9%) has been much slower.
7. Cost pressures are mounting
Much of the pressure on casual dining operators in 2019 has come from rising costs—especially of ingredients. Well over half (59%) of respondents to CGA’s Business Leaders’ Survey at the start of the year said they were very concerned by food cost rises in 2019, and there was alarm about rents, rates and labour costs too. As the Foodservice Price Index from CGA and Prestige Purchasing has shown, fears about inflation in key food and drink categories have been well founded.
8. Consumers demand value and quality
The BrandTrack survey is consistently clear on the two biggest drivers of consumers’ choice of restaurants: value for money and food quality. It’s an elusive sweet spot, but it is no surprise that brands that rate highly for both, like Wagamama and Nando’s, are those in the sharpest growth at the moment. By contrast, Chessell pointed out at Future of Finance, “Brands that don’t score well on either tend to struggle.”
9. Location, location, location
With margins so pressed, consumer confidence so sketchy and the economic future so uncertain, there is huge pressure on brands to get new openings right. That demands not simply knowledge of local demographics but a hyperlocal understanding of consumer behaviour. Using CGA’s range of location planning tools and segmenting consumers by their habits and preferences can deliver two big advantages in an ultra-competitive market.
The Future of Finance conference highlighted opportunities for growth in what is currently deemed a challenging market. Investment decisions need to be made wisely, and CGA’s location planning and consumer segmentation services combined with our expertise in market due diligence allow you to invest with confidence. To find out more contact karl.chessell@cga.co.uk
Future of Finance was supported by Caterer.com, Coffer Corporate Leisure, Fourth, Freeths, Odgers Berndtson, RSM and Zonal.
