UK food-to-go faces bigger dip but faster recovery

 

retailanalysis.igd.com

Since we released our UK food-to-go market forecasts for 2020-2022* in September, developments have occurred in both the virus path and the economic impact of the pandemic:

• The UK entered a second round of national lockdowns
• Advances have been made in vaccine testing and rollout
• Brexit/EU talks continue

But how do these changes affect the outlook for UK food-to-go?  Here’s a summary of the findings from our new report UK food-to-go market forecast: Q4 2020 update.

Bigger dip but faster recovery

The latest national lockdowns will adversely impact food-to-go in Q4 2020 and Q1 2021, however, the potential earlier rollout of a vaccine could mean a faster recovery, and government intervention (e.g. extended furlough) could aid survival for at risk businesses

So, although food-to-go sales in both retail and foodservice are likely to be slightly lower than we originally forecast for 2020, these could pick up faster in the second half of 2021 to reach or even exceed our original 2022 estimates.  This will be dependent on three factors:

• Speed of economic recovery – if households remain under financial strain, value could disappear from the market as consumers opt-out or down-trade on food-to-go
  
  
• Return to offices – if working from home continues at higher levels compared to pre-COVID, city centre and transport hub operators will be most impacted long term
  
  
• Resilience of food-to-go specialists – some operators may not be able to survive the impact of restrictions or will struggle to expand again, reducing capacity and choice in the market, which in turn leads to opting-out or down-trading and so reducing value

Shoppers did return to food-to-go habits 

Food-to-go missions conducted in the last four weeks

Source: IGD ShopperVista Food-to-go, Q3, 2019 – Q3, 2020, Base 1,141– Q3

As this chart shows, the impact of COVID-19 on food-to-go missions was clearly evident in Q2 this year but as operators started to open and lockdown restrictions eased we saw a recovery of food-to-go missions. The re-opening of coffee specialists, QSR’s and food-to-go specialists also aligned with a return to ‘stand-alone’ missions. 

We are expecting to see a drop off in Q4 2020 and Q1 2021 (although not to the levels of Q2) as continuing local restrictions and work from home messaging will make certain food-to-go missions less commonplace once again. However, the food-to-go industry should be encouraged by this temporary return to mission habits as restrictions relaxed.  This pattern bodes well for missions returning relatively quickly during the second half of 2021 following vaccine rollout, although the three factors mentioned above will determine whether they reach pre-COVID levels by the end of the year.

Who will benefit most from the latest developments?

1. Ranges focussed on core lines. When operations and resources are limited it makes sense to focus on the core (see McDonald’s latest strategy). Shopper research shows core lines, such as sandwiches, are still key.
   
   
2. A reliable value offer. Increase in shoppers stating they like the assurance of meal deals demonstrates they are more value focussed 
   
   
3. Short term – retailers. Return to singular food-to-go missions likely to decline again in Q4, benefitting large and small retailers.  Commuter footfall is likely to remain suppressed throughout Q1 and into Q2 2021 until vaccine rollout completes across all groups
   
   
4. Long term - digitally-focussed specialists. Faster than anticipated vaccine rollout could provide a lifeline to food-to-go specialists and coffee shops, through a quicker return to more normal lifestyle patterns. Those that have made advances in other channels, notably digital, will be best placed to ‘build back better’