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Growth in foodservice will be off-premise, predicts NPD Group

Visits in the British eating out market will fall over the next two years, however, the off-premise sector is expected to buck this trend as consumers increasingly opt for delivery and digital ordering, says NPD Group.

According to the global information company, the market peaked at 11.35 billion visits in 2017 but dropped - 0.5% to 11.29 billion in 2018. Despite population growth of +0.6% per annum, there will be a further drop of -0.5% in 2019 and another -0.1% in 2020 to reach 11.23 billion visits.

However, NPD is predicting a +5.0% increase in spend to £59.47 billion by end of 2020, against the £56.62 billion for 2018. This will be mainly driven by operators increasing menu prices as they respond to cost pressures, including inflation. The average individual cheque reached £5.00 in 2018 and will rise an additional 5.6% by 2020 to £5.30.

The drop in visits will be felt mainly by the on-premise sector (food and drinks consumed where purchased), as visits to the off-premise sector (delivery, takeaway/grab ‘n’ go and drive-thru) are forecast to reach 7.21bn by end 2020 (4% higher than 2018), while spend could jump +10% to £27.87 billion.

In particular, NPD forecasts takeaway and grab ‘n’ go visits will increase by 1.6% and spend to go up 6% by end 2020. It also says the industry will ramp up delivery and invest in drive-thru as an additional way of responding to the decline on the high street.

NPD’s forecast is for consumers to spend 22% more on delivery by end 2020 to create a delivery market worth £5.8bn annually. The number of delivery visits will jump 17% by the end of 2020 to reach 882 million. The delivery market currently accounts for 13% of all off-premise foodservice visits but by end of 2020 delivery’s share will have increased to 15%. By 2020, delivery could comprise almost 10% of spend in the total British out-of-home (OOH) or eat-out foodservice market, piling additional pressure on operators that rely heavily on on-premise visits.

The established trend of consumers trading down to cheaper eats when eating out is forecast to continue, while casual dining will also see strong growth in visits and spend. By contrast, full-service restaurants will continue to decline with a loss of 63 million visits, a drop of -9.3%. Similar to their QSR cousins, casual dining operators have been quick to expand into delivery. All leading casual dining chains are benefiting from this move into delivery, as well as an emphasis on product and service quality.

NPD also forecasts that any future growth in foodservice visits will be overwhelmingly tech-driven, with orders originating from digital kiosks instore or ordering online and via apps to exceed 1 billion per year for the first time by end of 2020.

The use of apps, in particular, is expected to continue to see a rapid increase in use, with visits that originate from an app (both click and collect and delivery apps) forecast to leap by 88% between now and the end of 2020. If app-based orders perform as predicted, they will have grown 2.5 times in visit terms since the end of 2017.

Dominic Allport, insights director with The NPD Group, said: “The pressures affecting on-premise eating and drinking is a big theme in British foodservice. The old habit of going shopping and finding a place to sit down and eat is on the wane as more people shop online. We are predicting that all the meaningful growth in foodservice will be ‘off-premise’ and this is where the industry will address the decline on the high street. We forecast that the modest growth in the large takeaway and grab ‘n’ go channel, supported by the continuing delivery revolution, is enough to provide 85% of the growth in spend over the next two years for the entire British foodservice industry.

"The growth of drive-thru is part of a trend towards more convenience and a result of consumers spending less time on the high street. But operators must address the big price gap between on-premise versus off-premise. The average on-premise cheque of £7.17 is nearly twice the £3.66 seen for off-premise purchases. Is that good for the industry?”

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