The UK dining sector: A recipe for change

As concerns over Brexit mounted in 2018, consumer spending on the UK’s high streets was anything but "strong and stable". One of the sectors most impacted was dining. Spend growth fell to just 3% year-on-year compared to 9% in 2017, according to our analysis of the transactions of over 2.5m UK bank customers. But it’s not all doom and gloom. While consumer behaviour may be changing, this brings new opportunities. New products and technologies are constantly emerging, which not only suit our evolving needs as consumers, but represent potential areas of growth for all dining businesses. Convenience is king The top lesson to take from consumer dining spending in 2018 is that convenience is king. The meteoric rise in the popularity of delivery services is credit to that. Delivery services continued to defy the headwinds facing the sector, with overall spend on platforms like Deliveroo and Just Eat up by almost 20%. Indeed, in 2018 alone, Just East surpassed 400 million orders in the UK, while Domino’s recorded its largest ever sales day in the UK. Just last week (17 May 2019), tech giant Amazon announced a big investment in Deliveroo, proving its worth. Average spend per order on delivery also bucked the broader sector trend, rising to an all-time high of £20.56 in 2018, compared to a steady decline to just under £20 at bricks-and-mortar restaurants. What this boils down to is consumers’ obsession with convenience. While there are plenty of occasions when we like to take our time over a meal and visit our favourite restaurant, a growing group of consumers are seeking a more streamlined service. The last thing they want is a cumbersome dining experience, wasting time waiting to place orders or pay the bill. But that doesn’t necessarily mean they don’t want to eat out, or that traditional restaurants can’t streamline the service they offer. Our analysis found that brick-and-mortar pizza chains that offer a ‘fast-casual’ proposition, like Pizza Pilgrims, are doing well, with spend growth up 4% in 2018. These brands offer cheap and quick dining options in an informal atmosphere with the added benefit of great customer service. Similarly, we’re already witnessing traditional brands investing in technology that powers a more seamless consumer experience. McDonald’s self-ordering stands have been hailed as a success, having reduced queues, delays and the number of staff needed to man the tills. A win for consumer experience, and for the brand’s operations. McDonald’s is going even further as of late, and other chains are following suit. Last year, both McDonald’s and Greggs introduced their own click-and-collect apps, while household names such as Pizza Express, Starbucks and Wetherspoons introduced order- and pay-at-table apps to streamline the experiences they offer to eat-in customers. The demand for convenience is also generating spend growth in other areas, including on-the-go lunches and takeaway coffee. Spend on both of these categories grew by 5% last year. Yet, it wasn’t younger consumers driving this trend. In fact, spend on takeaway coffee was up 7% while spend on lunches was up 9% among 49-58-year-olds, compared to just 4% and 2% respectively for 19-28-year-olds. The older age group is also spending more per trip than their younger, bargain-seeking counterparts. The 49-58-year-olds spent, on average, £5.32 per lunch and £6.53 per takeaway coffee order in 2018, compared to the £4.74 and £5.37 spent respectively by 19-28-year-olds. Health trend takes shape As well as convenience, consumers are hungry for healthy options to fuel their fast-paced lifestyles. The rise of paleo diets, raw food, superfoods and the increasing popularity of vegan and flexitarian lifestyles dominated the headlines in 2018, as consumers became more conscious of their own diets, food allergens and the environmental impact of their eating habits. Consumers are opting for the fresh, trendy, on-the-go options offered by the likes of Leon, EAT and Pret a Manger. As a result, salads, soups and sandwiches flew off the shelves in 2018, with spend up by 5%. A brand which has clocked this growing trend and adapted their approach is Pret a Manger. Just last month, the chain introduced its biggest menu shake-up in 33 years, including several vegan, vegetarian and gluten-free options – a direct response to the growing health trend and desire to appeal to a wide-range of diets. Likewise, Greggs recently raised its profit guidance for the third time this year, thanks to the huge, continued success of its healthier menu options and vegan sausage roll, which launched in January. This has had a knock-on effect on fast food and meat-based vendors. Spend growth in this area reduced to just 1% in 2018, compared to 11% in 2017. This time, it was health-conscious millennials and members of Generation Z leading the charge, with spend on fast food among 19-28-year-olds falling by 2% in 2018. This age group singlehandedly drove a decline in spend in burger and chicken restaurants, which fell by 7% and 6% respectively in 2018. And the heath trend doesn’t end with food. Beyond their lunch and takeaway preferences, health-conscious consumers are also paying more attention to what they drink. Across all ages, spend growth in pubs and bars slowed from 8% in 2017 to just 1% in 2018, suggesting that consumers are applying the same health philosophy to their drinking as to their dining. New opportunities While the headlines may be dominated by tales of woe for well-known restaurant chains, these new trends in consumer behaviour have opened up a wealth of opportunities for traditional brands to diversify their offers. Investing in convenience, be it through in-store technology, delivery or click and collect services, can help brick-and-mortar restaurants stay relevant. It also enables restaurants to build better relationships with their customers. When you’re a chain operating nationwide, it’s difficult to add that personal touch or understand what your customers really want. Through clever use of data, you can find out what appeals, be it rewards at the right time, or a certain kind of service. Tapping into the latest food trends and investing in new tastes by diversifying menus will also reap rewards in the long run. The challenge for casual dining restaurants in 2019 is to embrace change as an opportunity, and not be fearful of the unknown. By Duncan Smith, commercial director at fintech company Cardlytics