Rules of engagement

What are the first things consumers cut back on when there is an economic slow down? Eating out, drinking out and holidays. Is there going to be an economic slowdown? You bet there is. The level of personal debt in the UK is scary (one third of all debt in Europe is owed by Brits).

Interest rates have been low meaning the cost of borrowing – to fuel our spending – has been cheap. Oh and how we have been spending. Spend on hotels, restaurants, gadgets, personal care, clothing and recreation have soared. Spend on financial services like pensions have fallen. We’re living for today.

The Bank of England is trying to curb our spending by increasing interest rates (a third of all mortgages taken out last year were interest only mortgages versus 12% in 2003). It’s starting to have an impact. The value of new mortgages fell for the first time in years in April. Retail sales went backwards in April – for the first time in years. But leading economists believe interest rates will have to hit 7.5% before we really sit up and take notice.

The impact could be startling. Fifteen thousand Britons failed to pay a penny off their mortgages last year. Six million Britons have taken out debt consolidation loans in the last three years, and 3.4 million Brits pay only the minimum monthly requirements off their credit cards each month.

Our Sector Track programme shows there has been a decline in weekly population usage of fast-food and take-away outlets. People are cutting back, going healthy, or both.

Caterers are an important contributor to wholesaler sales. Consumer spending on out-of-home eating has grown significantly in the last ten years. Foodservice operators have “had it good” – rising consumer spend, changing lifestyles. Is that all about to end? In real terms, spend on out-of-home eating actually fell last year. Now it’s time to see if caterers can survive when the going gets a little tougher. With wholesalers taking more than just a casual interest in developments.

Our C C caterer study shows that caterers tend not to read the trade press, don’t change their menus very often, and don’t seek any advice to grow their sales. But there’s nothing like a good economic downturn to stop people in their tracks, and now may be the time for wholesalers to grasp the opportunity to engage with caterers more meaningfully.

If I was a wholesaler, I would be asking my caterer customers:

l Have they embraced local sourcing?

l Do they have healthy options?

l Do they communicate their fresh and healthy credentials well enough?

l Is it clear why customers should visit them?

l Do they recognise that eating out is as much about fuel (fast) as it is about indulgence?

l Is it clear to passers-by what is available to eat and drink in the premises?

l Are messages simple and clear?

l Have they put nutritional information on all menus?

l Do they cater for children?

l Do they integrate into local communities – become part of the local community?

l Have they recognised the opportunity for gifting – gift vouchers etc?

l Do they embrace seasons or events?

l Are they aware who lives around their outlets, and are they catering for them? eg is there a large Polish community?

l Do they do enough product sampling or tasting?

Retail is increasingly catching up with foodservice. Retailers are getting better at it – and are improving. It could be a bumpy ride ahead for caterers.

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