A flat market, fierce competition, mounting costs and staff engagement are among the big pressures facing out-of-home eating and drinking operators at the moment, CGA’s client director Fiona Speakman told the recent Arena Summer Event.
She drew on a wide range of CGA’s data sources to highlight the major issues—including figures from the Coffer Peach Business Tracker that reveal like for like sales growth of just 0.6% in the year to May 2018. She described the market as “flat but stable.”
CGA’s Outlet Index meanwhile reveals that there were nearly 4,000 more restaurants at the end of 2017 than four years earlier. But with consumers’ frequency of eating out remaining static, that trend has led to intense competition in the eating-out sector. At the start of the year, CGA’s Business Leaders’ Survey found that more than half (54%) of bosses were concerned about over-supply of sites in 2018—and CVAs and site closures from several casual dining brands in the first half of this year have justified those fears.
CGA’s survey found that three quarters (75%) of leaders were concerned about rising business rates in 2018, and more than half by the impact of rising food costs (55%) and the National Living Wage (53%).
Three in five (60%) leaders meanwhile cited staff availability as an important operational issue. But with only a third (36%) rating employee engagement in their firm as very good—and Brexit already causing problems in the recruitment of EU nationals—many brands will find retaining teams a challenge.
Speakman flagged up other issues facing operators at the moment, including the need for sustainability—with three in five (59%) leaders having plans for removing plastic straws from their operations this year—and the impact of the government’s ‘sugar tax’ on prices.
But she also highlighted reasons for good operators to be hopeful about the market. CGA’s recent Business Confidence Survey found that three quarters (75%) of bosses are optimistic about prospects for their business over the next 12 months, compared to just over half (52%) in November 2017.
CGA’s consumer segmentation tools, which help operators go beyond traditional demographic profiling and generational moulds to understand consumers from the perspective of their eating and drinking out behaviour, can spotlight opportunities in the market. Speakman said a key market opportunity lies with millennials—of whom a surprisingly high 39% are now parents, which opens up the potential for family-friend brands to cater to different consumer profiles.
Speakman pointed out that bars, pubs and restaurants that offer an attractive and on-trend drinks range can also benefit, with CGA’s BrandTrack research showing that 36% of consumers are driven to brands by the quality of drinks. Smart use of technology, especially on mobile devices, is another key factor.
But with consumers’ expectations continuing to rise, the overall quality of their experience is what really matters in their eating-out and drinking-out choices. “In a crowded market, products really need to shine to stand out,” she said.
Fiona Speakman was talking at the annual Summer Event from Arena, the network of hospitality businesses.