Overcapacity to slow growth in eating-out market

06 January 2016 by
Overcapacity to slow growth in eating-out market

Overcapacity in the UK's eating out market is likely to slow growth in the longer term.

That's the warning from foodservice analyst Horizons, which said that relentless growth among group operators was likely to put downward pressure on like-for-like sales, while competition among operators for new sites would intensify.

The growth in group operators has come at the expense of independently run businesses, which have seen a drop in numbers.

The number of chain restaurants has climbed from 7,700 outlets in 2001 to 11,900 in 2014 - a 55% rise. Quick service restaurants (takeaways, home delivery and counter-order outlets) have seen 78% growth from 7,600 in 2001 to 13,500 in 2014.

"It is difficult to see how this level of growth in food outlets can be sustained in the longer term," said Peter Backman, managing director, Horizons.

"Competition among operators means there will be a struggle to improve like-for-like sales across the sector, keeping menu prices fairly flat and margins low."

As part of its predictions for the coming year, Horizons also said it anticipated a further blurring of eating-out formats as operators seek to differentiate themselves. It pointed to the examples of Pret a Manger, which has developed a sit-down evening food offer, while Starbucks has turned its London Covent Garden site into a high-tech wine bar offering platters of food in the evening.

"Consumers are looking for a good quality eating experience wherever they are. This, and the pressure on sites means that operators are being extremely innovative and changing their offer to adapt," added Backman.

When it comes to food trends, Horizons predicted that dishes are likely to become spicier and more exotic, with influences from South America and Brazil, inspired by the 2016 Olympic Games in Rio.

"The year ahead is likely to be a challenge for operators with competition at its most intense. Those that maintain their quality, keep their menus fresh, their prices competitive and adapt to changing demand will emerge the winners," said Backman.

2016 predictions part three: the future for restaurants >>
Artisan coffee shops top Horizons' latest Ones to Watch survey >>
Horizons report: Eating out prices down, but side dishes boost spend >>

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