GlobalData: Quick Service Restaurants (QSR) reemerge in diverse formats

QSR finds a way

COVID-19 has hit the QSR industry especially hard, forcing restaurants to react quickly to market disruption and reemerge in diverse formats, seeking multichannel optimization.

+Physical social distancing and a ban on indoor consumption have led to many QSRs changing their operations to take-away only. Last summer, Pret launched a ‘Heat me at home’ range that enabled consumers to pick up their food and reheat at a later time. This minimized contact time in-store, and afforded customers added flexibility to eat when they wanted to. The retail channel also released a range of products designed to help consumers receive barista-quality coffee they had been missing during the lockdown. This multichannel shift in strategy could evolve further throughout foodservice, particularly if working from home becomes entrenched behavior for the years to come. For QSRs, it is another way of thinking outside of established practices to reach consumers and generate revenues at a time of restricted footfall.

Similarly, in September 2020, Dunkin’ Donuts teamed up with retailer and wholesaler BWG Foods to launch its pre-packaged donuts in 137 stores across Ireland. Distributed in small and medium stores like Spar, Mace, and Londis, Dunkin’ is better positioned to reach consumers that do not frequent the high streets that its stores tend to be located in.

Digital consumption

Online shopping has become a vital growth industry within bakery goods and will play an increasingly influential role in the coming years. GlobalData’s latest consumer survey (2021 Q1) reveals that two-thirds (60%) of Europeans agree that convenience and time-saving are the greatest benefits to online shopping over visiting stores; a further 35% highlighted minimized social contact as their preferred benefit. The pandemic has accelerated this trend as consumers seek to minimize their time in-store and opt for the convenience of ordering from the safety and comfort of their own homes.

The rise of online deliveries has, in turn, encouraged an uptick in dark kitchens, operating as an extension of the kitchen or as a separate entity. Dark kitchens are designed exclusively to cater to off-premise diners, allowing brick-and-mortar store restaurants the space to focus on alternative ways of entertaining their customers. In the long term, QSRs may constrict their high street presence to focus solely on take-out operations, particularly if hybrid and remote working trends prevail.

QSRs are in a position where they can adapt to changing consumer trends quickly by embracing digital technology. Broadly, operators must continue to streamline the pick-up process to be as contactless as possible – whether this is via drive-thrus, delivery platforms such as Deliveroo, or safe and hygienic drop-off/pick-up locations. On-site, the implementation of app-based and remote self-order kiosks to shorten lines will also prove highly beneficial. The challenge here is capital – many of these technologies may require substantial funds to implement, which, after months of lockdowns and reduced footfall, will prove difficult for smaller, independent operators.

Subscription services will allow for more tailored products, baked goods included. Most product launches are focused on emphasizing targeted health attributes without compromising on novel and unusual flavors or ingredient formulations. According to GlobalData’s Q1 consumer survey, over a third (36%) of Europeans buy bakery, cereals or morning goods from artisan and independent brands. QSR players should look at incorporating these products in their offerings, leveraging homemade and craft labels that can easily be delivered to one’s doorstep.

Packaging is another key factor; secure, sustainable and sleek packaging designs will help improve the brands' image, support both on-the-go and home consumption occasions, and reassure the consumer regarding concerns around contamination and hygiene.

Catch more with honey, protein and hemp

A recent trend that GlobalData has noticed is the incorporation of honey into bread products as a natural sweetener, while also retaining positive health connotations. Its natural and better-for-you positioning creates an opportunity for bread and morning goods brands to have honey as the central ingredient for sweetness, as it gives a stronger association to healthy eating than sugar. According to GlobalData’s 2019 Q3 consumer survey, almost three-quarters of Europeans (70%) believe that honey has a positive impact on their health. If leveraged properly, it is clear that honey has a strong value proposition in the product formulations. In the Czech Republic, Bauli’s wildflower honey croissant is high in fiber and capitalizes on both sensory and health trends. Similarly, in Turkey, Uno has released a honey oat bread with propolis, an unusual formulation that is also high in protein, vitamins and minerals.

Another interesting nutritional trend sweeping across Europe is that of high protein alternatives. Due to increased health awareness, consumers seek foods that help them to reach a

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balanced diet. As per the same survey, one in four (24%) Europeans are actively trying to increase their intake of plant-based proteins, which bodes well for bread and bakery manufacturers in the region. Switzerland’s Oh! High protein toast claims to contain 21% protein and is catered to busy breakfast occasions, reassuring consumers that they can easily reach their daily protein consumption targets in a convenient and tailored manner. Whereas, in Austria, Helga’s vegan Digestive Wellbeing bread taps into the personalization trend as it offers a solution to the consumers who opt and consume products that support their digestive health.

Breakfast products are also likely to increasingly incorporate hemp as a featured ingredient and highlight its functional health properties, particularly given the EU's recent rule (November 2020) that CBD should not be classified as a narcotic. The emergence of hemp and CBD in other FMCG categories such as confectionery, beauty and beverages, as well as breakfast products such as cereals and cereal bars, will help normalize the ingredient in consumer perceptions and boost hemp protein’s positive health association.

Impact on new launches

Aside from targeted health, recent new product development (NPD) of bakery products has centered around two underlying trends of premiumization and cross-category innovation. One of the latest trends to emerge is the yum yum and doughnut hybrid, known as the yumnut. This mixed product follows in the footsteps of the popular cronut, a croissantdoughnut pastry. Marks & Spencer launched its version of the yumnut in March 2020, claiming its butter-enriched recipe has a minimum 18-hour dough resting time, and 48 laminations to boost its layers and fluffy texture. Another product launch we saw last year was the ciabattin, a cross between ciabatta and sourdough. The classic ciabatta is merged with a sourdough process, then left to ferment over 24 hours. This product launch is symbolic of how prevalent experimental cooking has become over the past year. According to GlobalData’s 2020 Coronavirus (COVID-19) Week 11 Recovery Consumer Survey, half (49%) of European consumers somewhat or strongly agree that they ‘intend to experiment with new cuisines & recipes.’

Opportunities & forecasts

One quarter (24%) of Europeans agree that convenience is the main driver for patronage to QSR outlets, followed by good value for money (17%), according to the aforementioned consumer survey. As many return to active lifestyles, accessible, nutritious and convenient breakfast options will grow in demand. Subscriptions may be a great way for QSR players to cater to these needs and directly engage with the consumer, as well as attaining user information through the subscription service that will allow them to cater their products and menus further.

Overall, QSR operators should continue to prioritize safety and convenience in order to alleviate consumers’ ongoing concerns, and further improve the brands' overall reputation.

Europe will see robust volume and value growth in bread and rolls from the years 2019 to 2025. In USD value terms, West Europe and East Europe are expected to grow at a CAGR of 3.4% and 3.7% respectively, and a volume (kg) growth of 1.3% and 1.7% respectively. The bread and rolls market in Ukraine is anticipated to be the best performer in Europe with a volume CAGR of 5.1% from 2020 to 2025. Among the largest economies in Europe, the German and French markets are anticipated to decline by 0.16% and grow at just 0.7%, respectively. The static performance suggests market maturity and a lack of innovation in Europe’s largest economies. The forecasted performance will not be uniform throughout the European continent, however, with a number of the region's bread and rolls markets expected to contract in the coming years. Latvia is anticipated to decline by a volume CAGR of 2%, while Poland is expected to be the worst performer with a CAGR decline of 4.6% between 2020 and 2025. +++

Author: George Henry, associate analyst

George is an associate analyst in GlobalData's Consumer Division. In this role, he undertakes research and analysis on FMCG markets, with a particular interest in the impact of product innovation. George holds a master's degree in Economics and worked in the blockchain industry prior to joining GlobalData.

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