Eating Out Market Set To Exceed 2019 Values Despite Challenges

Namnews, 15th June 2022

The UK eating out market is set to be worth £95.2bn in 2022, a 4% increase versus its 2019 value – meaning that inflation is outpacing market growth.

This is according to the new UK Eating Out Market Report 2022 by Lumina Intelligence. It forecasts that outlet growth is expected to be positive from 2022, at a compound annual growth rate (CAGR) of +0.5% from 2022-2025, up from the -0.5% from 2019-2022F. Low ticket channels, including coffee shops, sandwich & bakery and fast food are gaining outlet share of the market post-pandemic.

Versus 2019, retail, travel and leisure is set to be the best performing segment of the UK eating out market, growing at 9.1% against its 2019 value. In comparison, hotels, pubs and restaurants are set for growth of 2.8% versus 2019 and contract catering will grow 3.4%.

At a value of £68.7bn, hotels, pubs and restaurants is the largest segment of the UK eating out market, but is also set to see the slowest recovery, with continued outlet decline and dampened consumer confidence impacting footfall in the segment.

Lumina Intelligence expects the top 10 UK eating out brands to be worth £15.2bn in 2022, with McDonald’s the biggest in the market. Brands including KFC, Greggs and Domino’s are expected to see turnover recovery from 2019 upwards of 20.0%.

As a group, the top UK eating out brands command a market share of 15.9% – a decline of 1.3ppts versus 2019.

The report highlights that there has been a 2ppt increase in consumers being price-led, amid decade-high inflation and the rising cost of living in the UK. 72% of consumers were found to align with price-led values, with Lumina Intelligence saying that operators across the market will need to emphasise value for money credentials through promotions, loyalty schemes and good quality products and services.

The proportion of consumers eating out saw a boost of 3% and visit frequency increased by 15% over the 12 weeks ending 15 May 2022, compared to the same period last year when dine-in was restricted to outdoor-only. Average spend grew by 12%, compared to last May period when occasions heavily relied on delivery and quick service channels.

However, between December 2021 and May 2022, these increases have been modest. Penetration rose by 3%, visit frequency remained flat at 1.5 times per week and spend grew just 2% to £10.79 per visit.

Lumina Intelligence noted that lunch occasions saw the biggest increase in day-part share during the 12 weeks to 15 May, compared to the same period last year (+3.3ppts). This growth has been at the expense of dinner occasions which have declined by 4.4ppts, as consumers opted for daytime occasions, including lunch, snack and drink-only occasions. This was driven by more workers being back in offices and seeking quick, affordable and on-the-go solutions.

Occasions that include both food and drink have dominated the eating/drinking out market in the latest 12 week period, up by 1ppt versus the previous 12 weeks period. Drink-only occasions also increased by 0.6ppts, showcasing the opportunity for operators to offer a greater range of meal deal pairings, including drinks to prompt consumers to purchase food alongside a drink.

Over the same period, alcoholic drinks increased their share of occasions by 1ppt, driven by sporting events and consumers opting for more pubs visits. Beer consumption increased by 2ppts, driven by the warmer weather and sporting events. San Miguel has grown its share by 2ppts, with consumers opting for more premium beers, highlighting an opportunity to drive spend through premium occasions.

Meanwhile, Lumina Intelligence forecasts that the eating out market will total £102.8bn in 2025, representing a compound annual growth rate (CAGR) of 2.6% from 2022-2025.

Inflation is forecast to sit between 2.0% and 2.5% from 2023-2025, meaning there will be little volume growth in the market to 2025.

The research notes that there is a £5.7bn size of the prize for the top 10 sub-channels from 2022-2025. Managed, branded and franchised pubs are set to lead in absolute value growth.

Senior Insight Manager at Lumina Intelligence, Katie Prowse, commented: “Operators across the UK eating out market will be buoyed by the end of the pandemic and the impact of a year’s trading without restrictions. However, the reality will not live up to expectations, as operators face rising costs, staff shortages and squeezed household incomes. We are already seeing the impact of these in the data, with spend growth and penetration both slowing. Operators face a significant challenge managing costs, as well as attracting footfall.”

She added: “Despite the challenges, there will be opportunities. This £5.7bn opportunity between 2022-25 shows the size of the prize for brands. Delivery, premiumisation and digitisation all continue to be key trends shaping the future of eating and drinking out. Delivery continues to grow its share of the total eating out market.”

NAM Implications:

• Delivery, premiumisation and digitisation will drive eating out growth.
• Ready?