UK branded restaurants to continue eating independents' market share

25 June 2013 by
UK branded restaurants to continue eating independents' market share

The UK branded restaurant market is set to grow by £5.6b over the next five years.

That's according to a new report by Allegra Strategies, which forecasts significant growth up to 2018 as branded operators eat into independents' market share. Allegra surveyed 22,000 consumers about their eating out habits, as well as 120 industry leaders about their expectations for the industry.

With an expected turnover of £16.4b in 2013 the market, which includes fast food operators, casual dining and pub/restaurants, is also being reshaped by changing dining habits, which are seeing diners being less formal and structured about the way they eat.

The main findings were:

• Branded/managed pubs, forecast at £7.6b turnover (for 2013) across 8,488 establishments with annual growth of 6.0% in sales and 3.1% in outlets, are well placed to benefit from the propensity to eat out informally throughout the day, with JD Wetherspoon leading the way.

• Branded fast food, valued at £4.5b turnover across 5,343 outlets, delivering annual growth of 5.7% in sales and 4.1% in outlets, is also in a strong position to benefit from all-day dining, with McDonald's leading the way.

• Branded full-service/casual restaurants are at a relative disadvantage, according to Allegra's report. It said that although growth in 2013 is robust with turnover of £4.3b across 3,896 establishments, representing annual growth of 6.3% in value and 3.7% in outlets, it will be harder to maintain growth and win consumer share as the market evolves.

• The inability to successfully offer a fast, quality breakfast menu will hamstring many of the leading casual brands. Casual brands are already under pressure as their key day-parts, particularly lunch, face intense competition from the widening eating out market, according to the report.

• Giraffe is one of a few good examples of branded casual restaurants catering to the all-day trend, influencing the strategic investment by Tesco, Allegra said.

Meanwhile, the report also documented the rise of branded chains at the expense of independents:

• Since 2007 branded outlet share has grown by 2.4 points to 14% by 2013, and by 7.3 points to 35% in share of total turnover value

• Allegra Strategies estimates that the branded restaurant market will continue to take share from independents in the next five years to hold 16.4% of outlets and 43% of value by 2018

• Branded/managed pub restaurants are significantly out-performing the wider pub market, driving the increasing branded market share, according to Allegra.

Independent/Tenanted pubs face more closures, pressure from off-trade and declining consumer engagement with wet-led formats. Branded pubs have increased outlet share by 3.1 percentage points to reach 16% by 2013. Value share has increased by 8.8 percent points to 48% since 2007, driven by the significant increase in food sales

And Allegra said that the street food movement, with its low-cost market entry model was gathering momentum, encouraging strong growth, influencing strong operators and challenged weaker small brands.

Anya Marco, director of insight, Allegra Strategies said: "Eating out is the new normal for UK consumers. The ability to eat out at any time of day is leading to a change in day-part frequency as consumer visits at breakfast are growing, while lunch and dinner are under pressure.

"The slow economic growth is less impactful than feared, though consumers are employing various money saving tactics in order to maintain their eating out habits. The pub restaurants channel is the most frequently visited by UK consumers, and JD Wetherspoon's is the nation's favourite restaurant brand for the first time. Make no mistake, pub restaurants will become an increasing force to be reckoned with!"

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