Food to go future – a look ahead to 2023.

Food to go FUTURE

What lies ahead for the food to go (FTG) sector in 2023? We canvassed the opinions of some of the sector’s businesses and commentators...

INFLATION PRESSURE

“According to the latest IGD figures, the faster than expected recovery in the post Covid food to go market will be dampened by rising inflation,” reports Phil Carratt, head of marketing & strategy at sector supplier, Country Choice.

“This year it predicts that the UK food to go sector will be worth £18.9bn, 3% more than its pre-Covid value in 2019. Although the return to growth has happened around six months earlier than estimated, any gains in 2021/22 will be offset by lower growth in 2023/24 as the rising cost of living impacts discretionary spend. By 2027, it says, the market will be worth £23.4bn, 28% more than 2019, but with a lower five-year Compound Annual Growth Rate (CAGR) than pre-covid (4.4% vs 6.1%). Inflation will be the main growth driver over the next 18 months with a minimal increase in volume predicted for 2023.

“During the pandemic, store prepared food to go struggled as the traditional customer stayed at home and retailers diverted both labour and shelf space to more in-demand categories. As a result, availability of food to go was poor. However, this approach has left retailers on the competitive back foot as footfall returned and consumers sought a change from homemade meals. That said, with the focus likely to be on value for at least the next 18 months, retailers are in a strong position. If they can get their price, offer, and format right, by 2027 retailers could more than regain share lost to foodservice operators during the pandemic to claim 23.7% of the food to go market (2019 22.9%, 2020/21 20%).

“Meal deals are a real asset to retailers but increasing ingredient costs will necessitate creative thinking when it comes to innovation and range extension. As a result, the price point, range, and execution of meal deals will become fiercely competitive, but if a retailer can get the balance right this could be a big win for them.

“Careful consideration needs to be given to the entire food to go customer journey and experience. Larger stores in particular will need to work on their layout to ensure food to go is more accessible, especially if they are broadening their range to include things like hot food, servery counters and coffee.

“Whilst delivery and click & collect have been big winners for foodservice operators, when it comes to online retail this is mainly associated with groceries, rather than food to go. Here again, it is worth retailers looking at the customer journey, this time online, and taking the opportunity to highlight their range, and in particular any meal deals, to shoppers who are planning ahead. They should also consider how to work with e-commerce partners such as Deliveroo and UberEats to identify new range opportunities focused on delivery.

“Finally, retailers should pay attention to exploring all out of home meal occasions in order to identify where they might be able to offer cheaper alternatives or treats, to go with evening meals, breakfast, or just a coffee.”

VALUE-DRIVEN PARTNERSHIPS

“A huge focus over the next 18 months will be value. Value-scrutiny has increased among consumers by +8ppts this year, with three in four consumers very value-led (Lumina Intelligence Eating & Drinking Out Panel),” says Katherine Prowse of Lumina Intelligence.

“Retaining value-credentials is a challenge for operators at a time of increased costs. Price increases on meal deals at well-known value-led players including Tesco and Sainsbury’s have been unavoidable this year. What operators are doing to counteract price increases is add value, through offering loyalty schemes as well as high quality options. Sainsbury’s added Costa coffee hot drinks into its meal deal offer and Tesco offers a lower priced meal deal for Clubcard owners. Good value does not just mean low in price, and for many consumers, good value will mean opting for a time-efficient, high quality option.

“Boosting value for consumers is also being done through partnerships, and this is something that we are expecting to see even more of. Following high profile announcements earlier this year with Costa and M&S partnering up, in October, Caffè Nero and Waitrose announced that they have launched a new partnership. It will provide benefits to each other’s customers through a linked loyalty programme, benefitting both brands from a loyalty and value perspective.

“Value and loyalty are only a part of the picture for the evolving food to go market, with a growing trend for higher quality, healthier and more internationally influenced options expected to expand in the mass market next year. In Q3 2022, food to go giant Greggs launched new products aligned with these trends with its Smoky Cajun Chicken Rice salad and Sweet Potato Bhaji and Rice salad. The brand has done this whilst being in-keeping with its lowprice credentials, with both salads priced at £2.95, -25% less than the average new main in the channel (Lumina Intelligence Menu Tracker Tool).”

CUSTOMER-CENTRICITY THE KEY

“We’re all feeling the cost pressures right now, whether from a consumer or a business perspective. But that needn’t be a reason to despair. There’s considerable scope to use the current dynamics as a positive, rather than a negative,” says Gavin Rothwell (pictured below) of Food Future Insights.

“And while it won’t be easy for any of us, I’m of the view that food to go is well placed to ride out the current storm. Ultimately, we still need to eat, and food, for various reasons, has increased in importance in our lives. Flip things around, and there’s justification to see the months ahead as a fantastic opportunity to create longer term loyalty with consumers, through demonstrating empathy with their situation and providing solutions that meet their needs.

“That said, a number of fundamentals need to be in place. For me, great product and customer-centric thinking are critical. It’s also vital for any business in this space to look at its own costs and labour model to see how that fits in with what continues to be a changing market. We’ve seen this already bring about considerable shifts in operating models, not least with the adoption of increased digital kiosk-based and appbased ordering at a raft of food to go operators, including Leon, Black Sheep Coffee, Starbucks and Abokado. Another key move to control costs is to reduce opening hours. Higher energy and labour costs raise the cost per hour of being open. And the deeper into winter we get, the greater the impact of higher energy costs will be.

“However, few sectors are better placed to deliver everyday moments of joy, something we all will likely need at some stage this winter. And if we can demonstrate the value for money of those options, that’s a strong platform in any economic environment. There’s scope – and maybe a need – for creativity here. I really like the approach of London food to go specialist Tossed for example, offering three items per day as daily specials – standard menu items, but at a lower price. And the items rotate through the week. Allguth, a petrol forecourt operator in Southern Germany, does a similar thing, with a different part of their hot food to go menu discounted every day. Logistically, it doesn’t add significant complexity, but should create extra impact, missions and sales. It’s not just about the discount, it creates an inherent marketing message to call out (probably at a time when many are looking to trim back their marketing spend). Plus, it incentivises broader menu exploration.

“Whatever your approach, a fundamental has to be quality. A temptation will be to reduce quality to hit price points. And while this will work for some, for most it will likely impact negatively, with a high risk of alienating existing customers. Consumers are more demanding than ever, and as we all know, can be unforgiving. So keeping consumers onside with your products and brand will be critical in the coming months. That’s what will drive longer term loyalty. A longer term strategy, with shorter term tactics to deliver for customers in times of need, is what is required right now. We will move beyond these current challenges, even if at times that might not feel to be the case. If you’ve compromised on what’s core to your ethos to make it work in the short term, you’ll find it considerably harder to get back on track when better times return. Keep the faith!”

CATALYST FOR CHANGE

“The last two or three years have been a catalyst for change in the food to go sector,” says mealtrak’s Nick Blake.

“The differences in companies’ abilities to react to such dramatic changes has been wide, with those looking at research and finding ways to diversify and pivot, proving more capable of survival, and even growth, than those who froze, perhaps hoping that it was all just a blip. As is evidenced in the current economic global landscape, and especially when combined with the British political situation, we are not yet in a position to believe that a smoother road is ahead.

“In our opinion, FTG delivery provided one of, if not the, most significant areas of potential, particularly in meeting the demand for workplace delivery. We are still witnessing growth in this area. With businesses such as Greggs, McDonalds, Aldi, and M&S all experimenting with delivery, it was only a matter of time until it became a big force in FTG.

“The explanation was straightforward - they were meeting an unmet customer demand! According to mealtrak statistics from January 2022, just over two-thirds of FTG purchasers found the notion of FTG delivery at work and at home intriguing - half of them felt it was extremely or very appealing.”

Glass half empty, glass half full…

Peter Backman (pictured) is an analyst, consultant, and longtime observer of the foodservice market. He writes two free newsletters - The Weekly Briefing Report and The Delivery World. Everything will work out OK, don’t worry too much. That’s me. I’m a glass half full person, so I thought it would be useful to take a look at the food to go market as a glass half empty person...

The world is scary at the moment. At the global level, politically and economically, it’s not how it has been and it’s not how it should be. As a result, we are faced with inflation, surging prices for gas and electricity, shortages of food, shortages of labour because the politicians don’t like migrants, and strikes, and don’t mention climate change.

All of these things feed through into our high streets as consumer concerns over how they are going to pay their mortgage. How are they going to be able to afford food to fill the fridge let alone school clothes for the kids? How are they going to cope with doubled energy costs - and then even higher costs in six months’ time?

One way they will cope is by cutting out all superfluous expenditure – like eating out.

And then there are the longer lasting changes caused by Covid. They include working from home which means less travel, so less spending on coffee at the station, and less expenditure at lunch time on sandwiches, pizza, and Bento boxes.

And that’s only consumers. What about operators? They too have higher energy bills to pay – placing existential threats in their path. How are they to cope with inflationary food costs when it’s not possible to increase prices because customers can’t (or won’t) pay any more? And then there are the difficulties in getting staff.

So not only is the world a scary place for customers, it is also scary for operators.

That’s the half of the glass that’s empty. What about the full half?

Nothing ever lasts forever. Just as the good times come to an end, so do the bad times. The food to go market has shown itself to be versatile and entrepreneurial. Over the longer term, food to go has embraced new ideas – drive throughs for example, and new menu lines – coffee, wraps, sandwiches and so much more. Just as Covid hit the sector by no longer allowing its customers to turn up, so operators invested in click and collect technology, and ramped up their delivery capabilities.

What happens then if we mix the glass that is half full with the one that is half empty? Pour one into the other, give the whole a good stir and what do we find? A vibrant industry that is going to go through extremely hard times but will come through the other side with many operators chastened by the challenges but all the stronger for it.

I hope that’s you.

A NEW ERA TAKES SHAPE

A NEW ERA TAKES SHAPE “Our forecasts for the future of FTG predict the continued return into offices and city centres and the increasing development of offices, rather than bleak views of the death of the city centre; whilst levels of tube usage in London or national bus usage and commuting trains remain below 2019 levels, they are gradually reverting and will continue to do so. Office space development in London has actually increased over the past three years in rising from 3.1m sq ft to 3.4m sq ft!” says Simon Stenning (pictured), founder, FutureFoodservice, a forecasting and strategic advisory service for the foodservice/hospitality industry.

“But the landscape of the market has changed for good, and we are in the next era for FTG. Polarisation of the sector and consumer behaviours forces operators to either provide value (cheap) or experiential (premiumised), and this is seen across other areas of the foodservice market, not just FTG; the economic pressures of a drop in real wage growth, increased borrowing costs, and potential higher taxation levels mean that consumers will be squeezed for some time. So, the value spectrum of the market will thrive, although competing with homemade meals; more premium offers will need to provide personalised, differentiated products for consumers to treat themselves, although frequency will be dampened. “The fast food sector is going to continue winning in both the value offers, such as Tim Hortons, and with the experiential, such

as Tortilla, or Five Guys. Technology is going to drive success in this sector, enabling value offers to reduce labour cost, and in making the customer journey more efficient. Fast food has led the way in this regard and will continue to develop solutions with voiceactivated systems, loyalty apps, NFC or Beacon recognition, enabling consumers to engage with operators to receive personalised orders and benefits. Self-scanning will continue to be implemented and developed, especially in the contract catering market, reducing labour requirements, in the same way that ‘just walk out’ technology will be implemented across the market (and indeed in other sectors such as sports stadia).

“So, the future of FTG will see continued growth from both a return into cities and offices, but also from consumers seeking greater convenience and leading faster lives, regardless of the economic situation. But the changing landscape of the market means that it will look different and the ways in which consumers engage with and purchase FTG will continue to change and develop – with technology/digitalisation continuing to drive engagement and purchasing.

“Our market size forecasts for 2023 are being developed right now, taking into account the economic and political pressures, along with newly emerging consumer behaviours, but we can say that growth will be slower than previously forecasted, and whilst the UK will technically be in recession, consumers will continue to live their lives and requiring FTG solutions will be part of that. Our forecasts and details of the changing landscape will be available in January.”