Sector Forecast: UK Foodservice Growth Trends 2021-2026
Published 2021 - Report Highlights
The UK foodservice market sector is projected to register a CAGR of 3.02% during the forecast period, 2021-2025
The COVID-19 pandemic placed unprecedented stresses on food supply chains, with bottlenecks in farm labour, processing, transport, and logistics, as well as momentous shifts in demand. Lockdown resulted in the closure of all pubs, cafes, and restaurants across the country.
There were times during 2020/2021 when, the entire industry came to a staggering halt; however, some restaurants remained open for delivery and takeaway. To address the lockdown hit to the industry, the UK government implemented an initiative to help the restaurant industry, the Eat Out to Help Out scheme, in August 2020, following the first COVID-19 lockdown. During the month of August, diners in participating restaurants received a 50% discount on food items, up to GBP 10, purchased in restaurants, pubs, and cafes. Such factors are likely to change the market scenario in the coming years.
For the whole of 2021 the forecasts are that the industry will see a £10 bn fall in revenues, down to only £88 bn, 10% lower than in 2019. The long-term growth forecasts for the industry are that it will recover to 2019 levels by 2025 at the latest, as the economic impacts linger, but that it will eventually increase to £108bn by 2030.
Insight Report commissioned by leading chef Marcus Wareing showed that 34% of consumers expected to spend less when they returned to restaurants. These insights imply severe revenue decreases for operators. Consumers will also certainly have high expectations over the standards employed to keep them safe, and the value that they receive from the experience.
Changing consumption habits
In lockdown, there was an obvious switch from eating out to delivered services, despite some restaurants not opening for a while. This switch to, and increase in, food delivery from restaurants and kitchens has remained despite restaurants re-opening at the start of July, and is part of a long term trend of changing consumption habits. It is forecast for the long term that the share of stomach (out of c.90 total meals eaten each month) will change, with grocery losing share to eating out, delivery and an increase in snacking.
Financial modelling shows that despite decreasing headcount, reducing costs and maintaining margins (which will be harder with potential increases in supply chain costs), a restaurant operating on 50% normal sales plunges to a significant loss, and only a rent reduction, rates holiday and drastic salary cuts will enable many restaurants to break even. The VAT cut (from 20% to 5%) from July was not passed on to consumers in the majority of operations, other than some large-scale branded chains such as Costa Coffee and McDonald’s. Most operators kept pricing the same in order to benefit from the increased margin to help with cash flow.
Decline in consumer spending
At the end of 2020, and continuing in 2021, are the increases in unemployment and/or people working form home, factors which will drag down consumer discretionary spending, whether physically reduced, or through exercising more caution. All together, these economic effects will mean that many sites may not re-open, or potential they could fail before 2022 especially if a further lockdown is enforced during Q4 2021.
Fast food best off
The new normality post-lockdown includes an expected reduction in travelling and commuting by public transport and more working from home, together with dramatic falls in in-bound tourism. As a result, certain sectors of the market will fare better, including fast food, which will steal share from service-led restaurants, due to their ability to provide takeaway, delivery and drive-thru services, as well as delivering intrinsic value.
If Covid-19 has taught us anything, it’s that the future cannot be predicted. But despite a rocky economic season, the UK restaurant industry’s future is not all doom and gloom. With delivery services keeping businesses afloat and creative dining approaches becoming more popularised, there are plenty of new and exciting trends expected to take place over the next few years that the food and drink industry can look forward to accommodating.
The Future Of The UK Restaurant Industry
While nobody can say for certain what the future will hold, what we do know is that it will come with both new challenges and new rewards. So far, 2021 has been a year of major adjustment, and we can expect this period of change and flexibility to continue for the next few years.
However, despite the many changes and challenges that the UK restaurant and hospitality industry do face, is positive for the future of consumer-business relationships and we predict that the economy will repair over time.
Technology, contactless payments, high-engagement websites and social media presences, superior delivery services and of course, high quality products are expected to spearhead the future of the food and drink industry-not just within the UK, but for the world as a whole.