Optimism laced with caution: CGA Peach’s 2016 Business Leaders’ Survey results

Leaders in the eating and drinking out sector are optimistic about growth in 2016—but there are concerns about intense competition, consumer spending and property and staff costs.

Those are among a wealth of insights from CGA Peach’s exclusive 2016 Business Leaders’ Survey, sponsored by Korn Ferry, which sets the agenda for the pub, bar, restaurant and the wider foodservice sectors in 2016.

It reveals that nearly half (47%) of leaders’ businesses performed ahead of expectations last year—a record high in the seven years of the Business Leaders’ Survey. A quarter of leaders (25%) are now very optimistic about business prospects for 2016, with more than half (58%) fairly optimistic.

But both these figures are slightly down on the last two editions of the survey, suggesting that optimism about 2016 is accompanied by significant caution—and that 2015 might even have marked a high point for restaurant and pub operators. Concerns for 2016 include fragile consumer confidence on spending, and only half of leaders (52%) expect visit frequency to increase in 2016, compared to more than three quarters (78%) last year.

The two key concerns for 2016 are around property and people. More than two thirds of leaders are either very concerned (34%) or concerned (35%) about rental and property costs, while similar proportions (34% and 36%) feel the same about the implementation of the National Living Wage. The possibility of market saturation (29% and 35%) is another major concern.

The notes of caution echo findings from other authoritative research tools from CGA Peach. The Coffer Peach Business Tracker found that like for like sales for managed pub and restaurant groups increased by only 1.5% in 2015—down from 2.8% in 2014. And the latest Market Growth Monitor from CGA Peach and AlixPartners identifies a noticeable slowdown in licensed premises openings amid fears of over-supply—though leaders of casual dining operators remain bullish on opening plans for 2016 in this latest survey.

Other findings from the 2016 Business Leaders’ Survey include:

•    Premium fast food is the format to follow in 2016, with 59% of leaders mentioning it as likely to thrive this year. All-day, flexible formats (51%) and street food or pop-ups (48%) are the next most tipped

•    Transport hubs will continue to increase in importance to restaurant and pub operators in 2016, with more than three quarters (78%) mentioning them as likely hotspots for growth. Town centre retail developments (60%) are next on the list

•    Craft beer is the top drinks trend identified by leaders for the fourth year in a row. On the food side it is healthier, ‘free-from’ foods that are most mentioned by leaders, with superfoods and barbecue also widely tipped

•    There are substantial fears about the potential impact of terrorism in the UK, with more than half of leaders either very concerned (17%) or fairly concerned (34%) about it. There is much less alarm around the ‘Brexit’ vote; only 8% and 21% are very concerned or concerned about its impact

•    Staff training and employee engagement are operators’ key investment priorities this year, with technology and digital marketing next

•    Technology remains a pressing issue for businesses, and leaders thinking it can add most value to payment solutions, marketing and promotion and staff training, recruitment and engagement

•    Operators expect much more from suppliers now, and not just on price; demand for insights and premium products is growing too.

CGA Peach vice president Peter Martin says: “2016 is going to be another year of change and challenges for the eating and drinking out market. This fascinating survey shows that eating and drinking out remains substantial, stable and ambitious—but intrinsic growth is hard-won, and competition out there is more intense than ever before. Property and people are tough nuts to crack, market saturation is a growing concern, and harnessing technology for business gain remains elusive. But for brands that can stay on top of trends, identify the right property and people and consistently deliver great customer experience, the future is bright.”

Holly Addison, head of consumer practice UK at Korn Ferry Futurestep, said: “As ever the year ahead will deliver a myriad of challenges and opportunities. Optimism is clearly cooling to a degree, yet predictions of new openings and investment remain ambitious. Looking forward into 2016 there is continued focus on customer centricity, and attracting and engaging with Generation Z will be a formidable challenge in this dynamic and thriving industry. In a hyper-competitive sector we are once again seeing the people equation dominating the agenda, and the arrival of the Living Wage and gender pay reporting bring an additional dynamic to the already ferocious battle for talent.”

CGA Peach’s seventh annual Business Leaders’ Survey is sponsored by global people and organizational advisory firm Korn Ferry. It incorporates responses from more than 260 senior executives, drawn from across the out of home eating and drinking spectrum, with 85% of them working at chairman, chief executive of director level. For more information about the report, email Jamie Campbell at jamie.campbell@cgapeach.co.uk