The eating out market is perking up a little. To some this statement may come as a surprise: hasn’t the industry been in boom times for some years? Well, yes and no.
On the positive side, some sectors of the eating out market have indeed been doing well. For example, so-called gastropubs, coffee shops and the burgeoning range of midspend restaurants that appeal to lifestyle conscious thirtysomethings – groups like Wagamama, Carluccio’s and La Tasca – have indeed grown recently.
But on the dark side, there is the continuing decline of the independent takeaway and the troubles of the mainstream burger market – first BSE and then healthy eating, fat and salt. And this has to be coupled with the price pressures in the non-commercial sector that includes staff feeding and hospitals. School meals have had additional problems with the recent negative impact of the Jamie Oliver effect.
Out of this host of conflicting trends, it is perhaps not surprising that the market has only moved forward tentatively since the boom years of the late 1990s. According to the database model of the eating out sector from Horizons, between 1995 and 2000 the market expanded by a pan-industry total of 344 million meals a year – out of an annual average of 8.35 billion meals. But over the next five years to 2005 this slowed to a net increase of 119 million meals. Happily, we fully expect this to increase to 210 million meals up to 2010 as the positive elements of the market outweigh the negative bits.
That is good news for everyone involved in the industry. For distributors, this growth means that there will be an additional pound;435m of food to be delivered by 2010. Most of this – pound;295m – will be supplied by delivered wholesalers whose share is forecast to increase marginally from 53% to 54%. Cash and carry operators will do less well and, in fact, we anticipate that their combined sales will fall by pound;92m over the five-year period as the sectors that they target – independents in the main – feel the heat from larger competitors. In contrast a channel that will do well over the next five years is third party contract distributors. They will benefit from the growth in large food operators – the sort of company that can really take advantage of the economics of logistics supply.
In terms of which companies will actually benefit from the growth prospects, it seems that there are two types of organisation that can fully optimise market developments. The first group is the already large suppliers who will be able to use their extensive resources to develop genuine partnerships with their customers and suppliers, and who will be able to drive their business forward by continuing to reduce their unit costs through economies of scale and enhanced purchasing.
The other beneficiaries will be small players, particularly those with a sectoral or geographic niche. These distributors will be able to build on their close knowledge of their markets and customers, to grow their business in expanding sectors.
So much for the generalities, but what really ties the successful distributors together will be their knowledge of what is happening, why and to whom. This understanding will be essential in the years that lie ahead.
In a market that is slowly becoming dominated by large operators, their suppliers will have to demonstrate their understanding of their customers’ market place. It will no longer be sufficient to supply acceptable products at competitive prices. What foodservice operators – large and small – need are suppliers who can genuinely help them by supplying a service which enhances the operator’s business.