The restaurant market is going to become fiercely competitive as the market improves and there is the danger that a bubble may develop as a host of operators jostle for position.
That's the assessment of Peter Backman of foodservice analyst Horizons, who took a look back at 2012 for the sector at today's Arena Christmas Lunch at the Mandarin Oriental Hyde Park in London.
Backman said that the restaurant market, worth £9.5b, was seeing shifting dynamics, as pub operators seeking to compensate for falling drink sales tried to move into the restaurant space, at the same time as fast casual operators premiumising their offer.
"What we have got here is a great number of brands all focusing on one particular segment of the market, which for want of a better word I am going to call fast casual," Backman said. "It is probably characterised by the spend of £10-20 per meal on average and is worth around about £4.6b. That whole market is getting very competitive."
"It has been complicated by the fact that we are seeing the top end quick service operators getting into the restaurant market. We are seeing a real battleground emerging here. The longer term position I am afraid I can see problems occurring. At the moment it is working, and operators are paying rational prices for the sites that they have got. But there will come a time where they believe that the market is actually moving ahead and they can't be left behind. And at that moment they are going to start paying more than they should for the sites that they want. At that point, their financial stability comes into question. I can see a bubble building and some concerns as they then move forward. To put that into some sort of context I don't see that happening until some real consumer confidence returns to the market. It is not going to be for a couple of years at least."
Looking back on 2012, Backman said that total F&B sales fo the year were set to hit about £43.5b, which represented a contraction of between -1% and -1.5% on the previous year. Including the effect of inflation, there was nominal growth of 1.5% to 2%.
The Olympics strongly benefited some operators including McDonald's and some contract caterers "inside the fence" of the event, but overall Horizons estimated that £55m less business had been done than could otherwise have done over the summer - although Backman said this was largely irrelevant in terms of the overall foodservice sector.
Summing up, Backman said: "Overall there has been a lack of clarity and certainty in the market. Things have been a bit tentative. Costs have been rising, there has been a focus on price, margins are being squeezed. But changing business models are leading to growth in some exciting segments."