RESTAURANTS

The restaurant market recorded one of the strongest performances of all of the sectors included in this Review in 2000. Sales in the market have benefited from increased disposable income and trading up by consumers to more upmarket outlets. Price increases in the sector have also affected value growth. Segmentation in the market has continued, with core sectors currently including pub-restaurants, roadside outlets, themed restaurants, informal dining and premium restaurants. Two of the leading sectors in the restaurants market are pub-restaurants and roadside catering, with branded outlets becoming increasingly important in both sectors. However, many other sectors in the restaurants market are still dominated by small independent operators.

Although leading players such as Whitbread and City Centre Restaurants have a wide portfolio of outlets in various sectors, it has been the more focused restaurant operators that have registered the better performances in 2001.

FAST FOOD AND TAKEAWAYS

Although sales in the fast-food and takeaway market increased in 2000, the year witnessed the weakest annual growth since 1996 (the height of the BSE [bovine spongiform encephalopathy] crisis). The main factors causing this were price discounting by major players and the opening of smaller outlets with lower revenue streams. Store expansion by the leading brands has continued to be the key market driver, although many of the new outlets are smaller, and are located on non-traditional sites where average sales per store are lower than many traditional outlets.

The largest share of the fast-food and takeaway market is taken by sandwiches. Demands for lighter lunches and more snacking and grazing, coupled with the development of a wider choice of sandwich fillings and different types of bread, have all boosted sales. The second-largest sector is burgers, followed by fish and chips, pizzas and chicken. The chicken market had a good year in 2000, as newer larger outlets were targeted more at family dining.

Although small operators dominate in terms of numbers, polarisation is increasing in the sector, with a very large group of small, often independent, players at one end of the market, and a very small group of global players at the other. In the catering industry as a whole, it is these global players that have the highest advertising expenditure by a considerable margin.

PUBLIC HOUSES

The public house market has also been one of the weakest performers in terms of sales in recent years. The reasons behind this include the decline in the number of pubs, a fall in the sale of drinks, and competition from other outlets, such as café-bars and brasseries, with women and younger consumers in particular switching to these outlets. In a market that is only undergoing marginal growth, the larger branded pubs are taking market share from the smaller, unbranded outlets. Many of the smaller outlets are the ones facing closure, and are also the ones where food sales are relatively low.

While drinks continue to take the largest share of pub sales, the sale of alcoholic drinks is in decline. In contrast, the percentage of sales taken by food is increasing.

Groups of pubs and pub chains continue to change hands at frequent intervals, as traditional owners sell underperforming and non-core outlets, while newer pub companies and investment companies increase their estates. This trend is likely to continue in 2001 and 2002. The effect has been to change the ownership profile of pubs and to reduce the role of the brewers, with less than a quarter of all outlets now being owned by brewers.

HOTELS

A high proportion of hotel users are corporate clients, with the remainder being leisure visitors. While the corporate market has performed reasonably well in the years to 2001, the consumer sector has shown only limited growth. This latter market is facing increasing competition from alternative leisure activities, such as low-cost flights and cheaper weekend breaks and holidays abroad.

The short-break holiday market is still one of the most dynamic sectors of the hotel trade, and increased advertising and promotional support is helping to develop this market. Many UK adults and families now take short-break holidays in addition to their main holidays. Although the total number of hotels is declining year-on-year due to consolidation, the budget hotel market continues to grow and outlet numbers are increasing. Moreover, while budget and premium hotels maintain sales growth, the mid-market hotel sector has come under the greatest pressure.

The hotels market will suffer more from a reaction to the terrorist attacks in the US than any other catering market. At the time this Review was published (November 2001), occupancy levels in many London hotels were already well down on the corresponding period in 2000.

CONTRACT CATERING

In terms of growth, contract catering has been the strongest sector in the catering market in recent years, and the growth rate for this market has been well above that for the overall catering market. However, this increase should be treated with some caution for, although the industry is doing well, a proportion of the increase in value sales in 2000 came from non-food contracts. As organisations continue to outsource a growing number of non-core activities, food contractors have developed expertise and services in these other contract areas. Therefore, the leading contract caterers now also offer services in areas such as waste disposal, cleaning, security and maintenance.

The largest sector in the contract catering market is business and industry, although this is a relatively mature market. Other core sectors are education, healthcare and catering for the public. Penetration of the education and healthcare sectors by contract caterers is still low, providing opportunities for further growth.

While sales growth has been impressive in recent years, the number of contract catering outlets has actually fallen. Value growth has been helped by an increase in the number of meals served, and more branding of outlets.

OTHER CATERING MARKETS

The other major catering markets covered by this Review are licensed clubs and holiday camps/villages and sites.

Both sectors have increased their catering sales by improving their menus, investing in catering facilities and sites and introducing more branded outlets from the High Street. In the licensed clubs sector, outlets such as casinos and bingo halls have tried to broaden their customer base, and this has had some knock-on effect on catering sales. Holiday camps have been rebranded as family entertainment centres, and an integral part of this rebranding has been the introduction of new catering concepts.

CONSUMER RESEARCH

In September 2001, Key Note commissioned original research to consider occasions and times when consumers eat out. Special occasions, such as birthdays and holidays, were the most popular times for eating out. Other important eating out occasions were get-togethers involving families or friends, and day trips.

The research confirmed that spending on eating out is very high among ABs, the social grade where disposable incomes are high.

FORECASTS

Economic uncertainties in the US and Europe, coupled with the inevitable downturn in overseas tourists into the UK following the terrorist attacks in September 2001, suggest that the UK catering market is about to face its most difficult period for some years. Key Note consequently forecasts only modest growth in the overall market in 2001, with market growth in the 5-year period between 2001 and 2005 likely to be at a rate substantially lower than in the previous 5 years (1996 to 2000).

Catering sectors that are now a part of the regular eating habits of a majority of adults, such as restaurants and takeaway food, should maintain steady growth. The contract catering sector should benefit from further penetration into new markets, although a UK recession will weaken growth. The sectors facing the most problems are likely to be hotels and public houses.