Business leaders predict eating and drinking out set to grow

Grillstock Bath

The eating and drinking-out market is primed for growth in 2015 thanks to the popularity of flexible formats, barbecue food and craft drinks, according to a new survey of business leaders.

However, the CGA Peach’s exclusive Business Leaders’ Survey found that property costs and the risk of saturation were “putting the brakes on out-and-out optimism”.

Examining the pub, bar, restaurant and wider foodservice sectors, the fifth annual survey shows widespread optimism about trade in 2015. Nine in 10 business leaders were either very optimistic (25%) or fairly optimistic (66%) about their own business’s prospects.

Operators with a heavy concentration of sites within the M25 tended to be more optimistic, as did newer companies.

But the Business Leaders’ Survey, sponsored by technology specialist Omnico, found that confidence was tempered by three key concerns around property, market saturation and staff costs.

Nearly three in four leaders were either very concerned (38%) or fairly concerned (34%) by property and rental costs – numbers that were significantly up on last year. Concern was particularly acute in London, where prices have spiralled highest.

Two-thirds of leaders were either very concerned (22%) or fairly concerned (42%) about saturation and possible over-supply. Similar numbers (18% and 46%) were also worried about staffing costs such as wages and pensions.

However, they were more optimistic about other fixed costs, with those expressing concern about energy prices and food costs both down this year.
Two in three (66%) business leaders predicted all-day and flexible formats would thrive in 2015. Premium fast food, like that provided by Leon and Tortilla, was expected to do well by 61%.

Funding for expanding operators seems to be improving, with two in three saying access had improved significantly (32%) or marginally (35%) over the last year – and crowdfunding is a particularly popular source.

The improved availability of funding is fuelling expansion plans, and one in three (31%) leaders said they planned to open more than 10 new sites in 2015.

UK travel hubs like airports and train stations were identified as growth hotspots by more than three in four (78%) of the business leaders. Town centre developments were the next best rated (56%).

More than half (57%) of leaders predicted that barbecue would make a big impact on the market in 2015 – up seven percentage points from last year. New openings last year included Grillstock in Bath (pictured) which specialises in American-style barbecue and craft beers.

Asked about drinks, nearly two-thirds (64%) said they expected craft beer would make a big impact this year. Next on the list was micro-distillery spirits (43%), reflecting interest in craft, niche and premium products across the drinks categories.

More than four in five leaders identified “engaged staff” (88%) and a high-quality customer experience (83%) as very important operational issues. A similar proportion (79%) said they would increase investment in staff training this year, and only slightly fewer (73%) in customer service.

Three in five (61%) business leaders believed that value for money was an important driver of consumer choice. But even more thought the same of food quality (66%) and service (79%).

Although many operators believe strong brand identity is vital in a competitive market, two in five (40%) leaders thought their business lagged behind their competition on this front.

CGA Peach’s Peter Martin said: “After a relatively quiet few years, our Business Leaders’ Survey shows that eating and drinking-out brands are firmly back in growth mode this year, building on the success most enjoyed in 2014, when most companies surveyed said they had met or exceeded their own expectations.

“But with competition fiercer than ever before brands will need to be on top of their game to thrive. Our poll of the UK’s brightest and best leaders reveals a wealth of opportunities out there, but a few pitfalls to be wary of too.”

The survey drew responses from 200 senior executives in companies across the eating and drinking-out spectrum, big and small. The full report is available to buy for £199.

In a separate piece of research from on-trade research specialist CGA Strategy, it was revealed that consumers paid a total of 165million visits to pubs, bars and clubs over Christmas – 15million more than during the previous festive season.

It found that 37.8million consumers visited the on-trade in the four weeks to January 3 – equating to an average of more than four visits each.

Venues sold an average of 569 more drinks over Christmas than in an average month – and over the four weeks, total food and drink sales were up 2% on last year.

The report is based on Christmas footfall trends from 5,000 consumers along with sales data from more than 5,000 managed outlets around the UK from the CGA Peach Trading Index.

CGA Strategy’s findings matched positive Christmas trading updates from leading pub operators such as JD Wetherspoon, Fuller’s, Marston’s, Greene King and Mitchells & Butlers.

They also tally with data from the Coffer Peach Business Tracker, which revealed that like-for-like sales for managed pub and bar groups in the longer six-week period to January 3 were also up 2% on 2013, although that figure is from a different sample, and includes casual-dining restaurants as well as pubs.

The CGA Strategy research also found that festive footfall reached a peak on New Year’s Eve, when 11.3million visits were made to the on-trade – half of them to pubs

Christmas Eve and “Black Friday” – the last Friday before Christmas – were also bumper days, with 9.6 million visits paid on each. The latter marked the on-trade’s best day for drinks sales.

Christmas Day, on which more and more consumers are choosing to eat out, was the day attracting the largest total of food and drink sales.

Food is now just as important to pubs as drink, which accounted for 51% of total sales over Christmas – in line with 52% last year.

Consumers like to experiment when eating and drinking out at Christmas, with 2.2million trying a new product or drink.

CGA Strategy client services director Rachel Perryman said: “This research shows that visits to pubs, bars, restaurants and clubs are an integral part of the UK’s Christmas, but it also reveals ways in which the on-trade can get an even bigger share of the festive spend.

“Operators who get their offer spot on and are prepared to experiment with products and promotions will be best placed to take advantage when Christmas comes around again.”

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