Meeting the challenge of change

One thing is sure, 2016 is already shaping up to be another year of change for the eating and drinking out market – as evidenced by our latest CGA Peach Business Leaders Survey, writes Peter Martin.

How will operators stand out in an ever more competitive and crowded marketplace? The out-of-home food and drink sector is both substantial and stable. Practically every adult eats or drinks out at some time. Good news, except that stability also means little intrinsic growth.

There are few new people to entice out, and the frequency of visits of those that do hasn’t effectively changed in the last two years, as our own BrandTrack consumer research demonstrates.

The tightness of the market is also reflected in annual like-for-like growth rate of just 1.5% among managed pub and restaurant groups, recorded by our own Coffer Peach Business Tracker. That’s about half the rate of this time last year.

It’s increasingly a market-share game out there – only amplified by the increasing supply of new sites, and especially of restaurants. There are signs that the roll-out of brands may be slowing, something that is reflected in the responses about expansion from many of the senior executives in this year’s Business Leaders’ Survey.

This year we had a record 260 leaders from right across the eating and drinking out spectrum taking part – and it’s clear that collectively they have a grip on the industry’s underlying dynamics.

Optimism about their own business prospects and those of the market as a whole remain high, with some seeing increased competition as a way to push up standards and make the market even more attractive to consumers.

But there is more caution around this year, with concerns about rent and property prices, the Living Wage and attracting staff and site oversupply at the top of the list of business challenges.

New issues such as the threat of terrorism and even Brexit make an entry too. In the wake of the Paris attacks, over half of leaders in the survey are now either ‘concerned’ or ‘very concerned’ about the impact of terrorism – making it a bigger issue than investor confidence food costs or VAT. Less than a third were concerned about Brexit when the survey was carried out in January, but that may now change.

Operators understand they have to live with competition – and a changing competitive landscape as new entrants join the fray. Although, craft beer and street food are seen by most as continuing big trends, many also see health taking a bigger role this year, with ‘free-from’ and super foods gaining more importance – not to mention third party delivery services.

The allure of all-day trading may also be beginning to fade a little, with a move to premiumisation growing as a way of wowing customers.

Growth will be hard won, and efficiencies will be sought, particularly through technology – although more work may be needed in planning for that growth in the boardroom with proactive succession management.

Operators also want more from their suppliers and not just better prices. Thought-leadership, insight and more premium products are all on the wish-list.

As a research consultancy, those first two points haven’t escaped our notice, and so it’s perhaps appropriate that this year’s Business Leaders’ Survey also coincides with the unveiling of one of CGA Peach’s own big changes for 2016 – the launch of the first of our new-look quarterly Peach Reports. Each will now be dedicated to in-depth analysis of specific major topic areas, harnessing our years of market understanding to our powerful and ever-evolving research tools – all to provide even more agenda-setting insight for the market.