It’s a changing market – where innovation is key

Peter Backman, Managing Director of Horizons, tells us about the trends in the market and explains how innovation is key…

At the beginning of 2016, Horizons issued its annual forecast for the trends we were likely to see in the UK’s foodservice sector in the year ahead. Their overriding theme centered on overcapacity in the sector, which is likely to slow in the longer term by putting downward pressure on like-for-like sales, while competition amongst operators for new sites will continue to intensify.

Relentless growth amongst group operators has driven outlet numbers upwards, largely offset by a drop in independently-run businesses. Over the past decade growth in the number of food-serving outlets has been strongest in the pub sector where operators have moved primarily from wet-led sales to food-led.

The number of chain restaurants has also shown strong growth, from 7,700 outlets in 2001 to some 11,900 in 2014, a 55% rise. Quick service restaurants [primarily takeaways, home delivery and counter-order outlets] have seen a 78% growth, from 7,600 outlets in 2001 to 13,500 in 2014.

It’s difficult to see how this level of growth in the number of food outlets can be sustained in the longer term and competition is likely to intensify. One outcome of that has been a blurring of eating out formats. With food outlets already having moved into new locations such as shopping malls, leisure outlets and transport hubs, businesses continue to broaden their offer away from their core niche – with Pret a Manger, for example, developing a sit-down evening food offer; Starbucks turning its London Covent Garden site into a high-tech, wine bar offering platters of food in the evening; and Costa, as well as Starbucks, joining forces with a healthy food brand.

We have also seen a strong growth in the numbers of American-style restaurants such as barbecue pits, smokehouses, burger bars, and diners which could be about to replace Mexican outlets as the biggest growth area on the UK’s eating out scene over the next few years,

Our biannual Ones To Watch report, which tracks the growth of new and emerging brands with between five and 25 outlets and which have shown over 20% growth over the past three years, lists a number of US-themed outlets in its list of the top10 fastest growing brands, either by number of new outlets or percentage growth, and an even larger number of US-themed fledgling ‘Bubbling Under’ brands.

While Dunkin’ Donuts tops the latest chart of the fastest growing brands by percentage growth rate (2013-2016), US themed Red’s True Barbecue comes in jointly at number six alongside Grillstock Smokehouse while Coast To Coast, the Restaurant Group-owned American-themed outlet, now has 21 sites with another four planned to open this year.

American-style restaurants are opening across the UK on high streets in affluent market towns and secondary cities, many in converted pub premises, which offer the size, location and parking facilities that suit these all-day diners.

American casual dining certainly isn’t new to the UK but we are seeing a steady resurgence in its popularity as operators have modernized and upgraded the concept. They appeal to a broad range of consumers, whether dining as a couple, a family or a group of friends. Not only that but they are good value, often offer a broad range of dishes of various cuisines, with friendly service and sophisticated marketing.

While Mexican burrito bars and restaurants were the growth story of the past few years the market now seems to have reached a point of consolidation whereby the main players continue to expand but fewer new operators are emerging.

In terms of other food trends Horizons’ most recent Menu Trends research has recently noted the popularity of humble macaroni cheese, as mac ‘n’ cheese clocks growth of over 550% on British restaurant menus since 2010.

Mac ‘n’ cheese has become a firm favourite on British menus loved by both consumers and restaurant operators who can add simple twists to the classic dish with the addition of a range of ingredients or crunchy toppings for a relatively low price. The dish is also being served in restaurants in a variety of ways such as inside a burger or calzone or as a side dish.

Horizons’ biannual Menu Trends survey, which tracks changes on the menus of 120 high street eating out brands, also reveals that the pulled pork phenomenon is far from over, with 20% more menus featuring the dish year-on-year.

Hash potato dishes are another revamped dish growing in popularity, listed on 18% more menus this year than last. Hash is being served with ingredients such as halloumi and beetroot, duck confit, eggs or chorizo.

Like macaroni cheese, coleslaw has undergone a similar makeover and re-emerged as ‘slaw made with ingredients such as bacon and cranberry, fennel & beet, or as chilli slaw. The popularity of ribs continues too – up 11% year-on-year – appearing as a main course or on sharing platters topped with a variety of sauces.

Beefburgers and pizzas are still the nation’s more frequently listed dishes although rump steak is becoming more popular with steady growth over the past two years.

Concerns over healthy foods appear to be increasing too, with 45% more menus mentioning ‘superfoods’, while the words ‘allergy’ or ‘allergen’ increased 20% year-on-year. The number of vegetarian dishes listed on menus has also risen since last winter, up to 27% of menu items from 23% last year.

There is no doubt it is a challenging market and one in which no operator can afford to stand still – innovation and the importance of keeping your offer fresh remain paramount.

Peter Backman is the managing director of Horizons, the analyst and specialist information consultant for the foodservice and hospitality sector. Peter is an expert on the structure and dynamics of the foodservice sector, and its supply chain, in the UK and across Europe. He has been involved in foodservice, as an analyst, researcher and consultant, for almost 30 years.