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Executive Summary

Table of Contents

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EXECUTIVE SUMMARY

• INTRODUCTION
• RESTAURANTS
• FAST FOOD/TAKEAWAYS
• PUBLIC HOUSES
• HOTELS
• CONTRACT CATERING
• OTHER CATERING COMPANIES
• FORECASTS

INTRODUCTION

Total consumer expenditure on the catering sectors covered by this report came to £40.9bn in 1998, an increase of 5.2 percent on the 1997 total. The 1998 increase in value continues the trend set in the previous 4 years when year-on-year growth has averaged between 4 percent and 5 percent at current prices. Most catering markets have benefited from increased spending generated by stronger consumer confidence and generally improved economic conditions. Increased branding, supported by more advertising support, and the launch of various new catering concepts have also generated interest in the market. Other measures of the UK catering sector support the view that the market is in the middle of a period of healthy growth. Brand support is increasing, particularly in the fast-food and restaurant chains sector, and the leading operators are increasing their outlet numbers. Employment in the catering sector has also increased by 9.5 percent between 1994 and 1998, and the share of total household expenditure taken by catering expenditure is gradually increasing.
The largest sector of the market, measured by turnover, is public houses -- pubs (33 percent value share), followed by hotels (20.5 percent), restaurants (16.8 percent) and fast food/takeaways (16.1 percent). These latter two market segments changed places in order of market share in 1997, following boom times in the restaurant market. Other market sectors are contract catering (6.5 percent), and licensed clubs catering and catering at holiday camps, holiday villages, caravan and camping sites (6.7 percent).
In this buoyant but highly competitive market, merger and acquisition activity has been strong in recent months and major deals in 1999 have been the purchase of Allied Domecq's pubs by Punch Taverns, the sale of Stakis to the Hilton Group, and the purchase of The Greenalls Group pubs and restaurants by Scottish & Newcastle.

RESTAURANTS

The restaurant sector, more than any other catering sector, has taken advantage of the increases in personal disposable incomes (PDIs) of the last few years and has positioned itself at the centre of the growing UK leisure sector. Restaurants have been the best performing catering sector over the last few years, and brand proliferation and improved menu choices have been used to segment the market and encourage more dining out. By 1998, the UK restaurant market was valued at £6.87bn, an increase of 9.8 percent on the previous year. Price increases have contributed to this strong growth in 1998, but there has also been real growth in the sector. In 1999, 62 percent of all adults visited a restaurant in the evenings and 50 percent visited during the day.
Two of the leading segments are:

* pub-restaurants -- valued at £1.2bn in 1998
* roadside catering -- valued at £538m in 1998.

In both these sectors, branded outlets have become more important, but many other segments of the market are still dominated by small, independent operators. The growth in the number of brands on offer hides the fact that many of these brands have been developed by just a handful of key operators led by Whitbread, Bass and City Centre Restaurants.

FAST FOOD/TAKEAWAYS

Sales in the fast-food/takeaway market increased by 6.7 percent in 1998, and the market was worth £6.58bn. With branded outlets springing up almost everywhere, and strong marketing and merchandising deals supporting the major brands, more consumers are taking the opportunity to eat convenient fast food and takeaways. In 1999, 75 percent of all adults visited a takeaway and 48 percent visited a fast-food restaurant to eat. This latter percentage increases to 71.9 percent in the 15 to 24 age group, the core market for the global fast-food brands.
The largest share of the fast-food/takeaway market is taken by sandwiches (34 percent of all value sales), and the second largest sector is burgers (24 percent). Burgers have been increasing their share of the market in 1998, as outlets recover from the BSE (bovine spongiform encepthalopathy) scare and menu diversification attracts more consumers. The other core sectors are fish and chips (13 percent), pizzas (10.3 percent) and chicken (6 percent). The remainder of the market comprises various ethnic food outlets and other outlets and takeaways (14 percent). The sandwiches sector continues to perform well benefiting from continued consumer preferences for quick, lighter and healthier lunches, and the availability of a wider choice of sandwich fillings in more outlets.
Small operators dominate in terms of numbers, but the fast-food sector, more than any other catering sector, has a number of companies which dominate sales in their market. McDonald's claims 72 percent of all fast-food burger sales in the UK, while KFC has an estimated 65 percent of the fried chicken market. Pizza Hut and Burger King are also core brands with 32 percent and 20 percent, respectively, of their specific markets.

PUBLIC HOUSES

Pub sales were valued at £13.65bn in 1998, a modest increase of 1.5 percent on the 1997 value. However, this small increase hides the fact that larger pubs are taking a greater share of the market, and sales through these outlets are increasing at a faster rate than the market average. The sufferers are mainly the small traditional pubs. A major influence on the success or otherwise of many pubs is food sales. In 1998, pub food sales were valued at an estimated £2.2bn, increasing by 7.5 percent on 1997. Excluding pub-restaurant sales, which are included in the restaurants section, pub food sales were £929m in 1998. As pub drink sales have declined, food revenues have become more important: in 1998, an estimated 15.8 percent of all pub sales were attributed to food, more than double the share in 1989. (15.8 percent is the average across all the sector and, in many of the larger pubs, the share taken by food could be as high as 50 percent.)
The pub sector has experienced something of a transformation in the 1990s, with the number of pubs declining and the ownership of pubs changing. In 1990, there were 55,000 pubs, but this total fell to under 52,500 in 1998. Also changing is the structure of the industry with the effects of the Beer Order regulations still coming through. The large brewers were forced to sell some of their large pub estates and the result is an industry which is run by various pub operators including a small number of national brewers, regional brewers, some large pub retailers which have left brewing to concentrate on retailing, and a number of new pub companies which have been established in the 1990s to take advantage of the Beer Order legislation.

HOTELS

In 1998, turnover in the UK hotel market increased by just 3.5 percent producing a market valued at £8.37bn. After a period in the doldrums during the recession, the UK hotel market has been fairly buoyant in recent years but annual sales growth is beginning to slow down.
Around 64 percent of hotel users are corporate clients and the other 36 percent are leisure visitors. The corporate market has recovered strongly in recent years, but the leisure market is still subject to variables such as the weather, personal incomes and the number of overseas visitors to the UK. The short-break holiday market is one of the most dynamic sectors of the hotel trade, and increased advertising and promotional support is helping to develop this market. The budget hotel market continues to be the fastest growing market segment, with many of these chains moving into city centres from their traditional out-of-town bases.
The recession reduced the number of hotels in the UK and the leading chains have been involved in major refurbishment and disposal programmes since 1997. Surprisingly for a sector with a number of global players, branding is still relatively limited although this is increasing as the leading operators compete for a share of the mid-range market.

CONTRACT CATERING

In 1998, the UK contract catering market was valued at £2.65bn, a significant increase of 17.4 percent on the 1997 total. This increase should be treated with some caution for, although the industry is doing well, a proportion of the 1998 increase in value sales comes from non-food contracts. As organizations continue to outsource a growing number of non-core activities, food contractors have developed expertise and services in these other contract areas. So, the leading contract caterers now also offer other services in areas such as waste disposal, cleaning, security and maintenance. Key Note estimates that around 50 percent of the growth of the market in 1998 can be attributed to these non-food activities.
Another measure of the growth of the sector is the increase in the number of contract catering outlets. Between 1994 and 1998, over 3,200 outlets were added producing a total outlet figure of 18,151 in 1998. Business and industry contracts account for 50 percent of the market, but the growth areas are education (21 percent), healthcare (10 percent) and catering for the public (10 percent). The latter area is increasingly blurring the divide between consumer catering and institutional catering.
An increase in the number of businesses and the number of contract catering outlets are other signs of strong growth in this sector in recent years. New entrants have been attracted by the low entry costs, low market penetration and the potential opportunities. Growth in the UK market has also been accompanied by strong growth in global markets; and the leading UK contractors, notably Compass and Gardner Merchant, are also major international food service companies.

OTHER CATERING COMPANIES

The other major catering markets covered by this report are licensed clubs, and holiday camps, villages and caravan sites. Both these markets generated catering sales of £1.38bn in 1998, and both increased sales by 5 percent over the previous year.
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. Holiday camps and villages, in particular, have been adding branded outlets and the leading holiday centre operators, Rank and Scottish & Newcastle, are also owners of catering brands. The customer bases of the two markets, however, are different: patrons of licensed clubs are mainly young male adults in the C2 and D social groups, while holiday camps and villages are mainly targeted at young families.

FORECASTS

Key Note is forecasting a 5.4 percent increase in the catering market in 1998, producing a market valued at £43.1bn. The Millennium celebrations should boost sales towards the end of the year, although the `hype' surrounding the event may not match the reality as far as caterers concerned. Fewer people are now expected to use catering outlets at the end of the year with more staying in or having private parties. Sales growth is likely to be slower from 2000 onwards as saturation is closer in some markets. The strongest performing sector is likely to continue to be restaurants.

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TABLE OF CONTENTS

Executive Summary

Executive Summary

Market Overview

DEFINITION

INDUSTRY STRUCTURE

EMPLOYMENT

THE TOTAL MARKET

MARKET SEGMENTATION

ADVERTISING AND MARKETING

PEST ANALYSIS

KEY TRENDS

EUROPEAN AND GLOBAL TRENDS

Table 1.1: Businesses in Catering and Allied Trades by Sector (number and percent share), 1998

Table 1.2: Businesses in the Catering Sector by Turnover Size (numbers and percent share), 1997 and 1998

Table 1.3: Employment in Selected Catering Sectors - Great Britain (000), 1993-1998

Table 1.4: The UK Catering Market by Value (£m), 1994-1998

Table 1.5: Consumer Spending on Catering at Current Prices (£m), 1993-1998

Table 1.6: Consumer Spending on Catering at Constant 1995 Prices (£m), 1993-1998

Table 1.7: Average Weekly Household Expenditure on Meals Eaten Outside the Home and Takeaways (£ and pence), 1994/1995-1997/1998

Table 1.8: The UK Catering Market at Current Prices (£m), 1994-1998

Table 1.9: Breakdown of the UK Catering Market by Sector ( percent share), 1994-1998

Table 1.10: Main Media Advertising Expenditure in Major UK Catering Sectors (£000), Year to June 1997-1999

Table 1.11: Consumer Expenditure at Current Prices - Total and on Catering (£m and percent), 1994-1998

Table 1.12: Employment in Great Britain - Total and in Catering (000 and percent), 1994-1998

Key Note Field Research

INTRODUCTION

Table 2.1: Survey of Consumer Eating-Out and Drinking Habits ( percent agreeing), 1999

Table 2.2: I Eat in Public Houses at Least Once a Month ( percent agreeing), 1999

Table 2.3: I Eat in Fish and Chip Shops/Restaurants at Least Once a Month ( percent agreeing), 1999

Table 2.4: I Eat in Chinese Restaurants at Least Once a Month ( percent agreeing), 1999

Table 2.5: I Eat in Indian Restaurants at Least Once a Month ( percent agreeing), 1999

Table 2.6: I Eat in Mexican Restaurants at Least Once a Month ( percent agreeing), 1999

Table 2.7: I Eat in Carveries/Steakhouses at Least Once a Month ( percent agreeing), 1999

Table 2.8: I Eat in US Diners or Bistros at Least Once a Month ( percent agreeing), 1999

Table 2.9: I Eat at Pizza or Pasta Restaurants at Least Once a Month ( percent agreeing), 1999

Table 2.10: I Eat at Fast-Food Burger Outlets at Least Once a Month ( percent agreeing), 1999

Table 2.11: I Eat in Thai Restaurants at Least Once a Month ( percent agreeing), 1999

Table 2.12: I Eat in Vegetarian Restaurants at Least Once a Month ( percent agreeing), 1999

Competitor Analysis

INTRODUCTION

MAJOR PLAYERS

Table 3.1: Major Companies with Interests in More Than One Catering Sector

Table 3.2: Selected Catering Companies by Turnover (£m), 1997/1998/1999

Restaurants

DEFINITION

KEY TRENDS

MARKET SIZE

INDUSTRY STRUCTURE

MAJOR PLAYERS

ADVERTISING AND PROMOTION

BUYING BEHAVIOUR

FORECASTS

Table 4.1: The UK Restaurant Market by Value (£m), 1994-1998

Table 4.2: Retail Price IndexÅ for Restaurant Meals (1987=100), 1994-1999

Table 4.3: The UK Pub-Restaurant Market by Value (£m), 1994-1998

Table 4.4: The UK Roadside Catering Market by Value (£m), 1994-1998

Table 4.5: Number of Restaurant BusinessesÅ, 1992-1998

Table 4.6: Number of Restaurant Businesses by Turnover (number and percent), 1998

Table 4.7: Major UK Restaurant Operators and Key Brands, 1999

Table 4.8: Main Media Advertising Expenditure by Selected Restaurant BrandsÅ (£000), Year to June 1997-1999

Table 4.9: Visits to UK Restaurants ( percent), 1999

Table 4.10: Profile and Penetration of Restaurants in the Day ( percent of all adults), 1999

Table 4.11: Profile and Penetration of Restaurants in the Evening ( percent of all adults), 1999

Table 4.12: Frequency of Visits to Restaurants by British Residents ( percent of all adults), 1999

Table 4.13: Restaurant Types Visited in the Last 3 Months ( percent of all adults), 1999

Table 4.14: Forecasts of the UK Restaurant Market (£m), 1999-2003

Fast Food/Takeaway

DEFINITION

KEY TRENDS

MARKET SIZE

INDUSTRY STRUCTURE

MAJOR PLAYERS

ADVERTISING AND PROMOTION

BUYING BEHAVIOUR

FORECAST

Table 5.1: The UK Fast-Food/Takeaway Market by Value (£m at rsp), 1994-1998

Table 5.2: The UK Fast-Food/Takeaway Market by Sector (£m at rsp and percent), 1998

Table 5.3: The UK Sandwiches Market by Value (£m at rsp), 1994-1998

Table 5.4: The UK Burger Market by Value (£m at rsp), 1994-1998

Table 5.5: The UK Pizza Market by Value (£m at rsp), 1994-1998

Table 5.6: The UK Chicken Market by Value (£m at rsp), 1994-1998

Table 5.7: The UK Fish and Chips Market by Value (£m at rsp), 1994-1998

Table 5.8: Other Fast-Food and Takeaway Market by Value (£m at rsp), 1994-1998

Table 5.9: Estimated Number of Outlets in Selected Fast-Food Markets, 1998

Table 5.10: Estimated Market Shares by Value of Major Fast-Food Brands ( percent), 1999

Table 5.11: Leading Hot Fast-Food and Takeaway Chains by Number of Outlets, 1999

Table 5.12: Main Media Advertising Expenditure by Leading Fast-Food Brands (£000), Years to June 1997-1999

Table 5.13: Adults Visiting Takeaway or Fast-Food Restaurants ( percent), 1999

Table 5.14: Frequency of Visiting Takeaway and Fast-Food Restaurants ( percent of adults), 1999

Table 5.15: Penetration and Profile of Fast-Food and Takeaway Food in the UK ( percent), 1999

Table 5.16: Forecasts of the UK Fast-Food and Takeaway Market (£m), 1999-2003

Table 5.17: Forecasts of the UK Fast Food and Takeaway Market by Sector (£m), 1999-2003

Public Houses

DEFINITION

KEY TRENDS

MARKET SIZE

INDUSTRY STRUCTURE

MAJOR PLAYERS

ADVERTISING AND PROMOTION

BUYING BEHAVIOUR

FORECASTS

Table 6.1: The Public House Market by Value (£m), 1994-1998

Table 6.2: The UK Public House Catering Market by Value (£m), 1994-1998

Table 6.3: Share of Public House Turnover Taken by Food Sales ( percent), 1988-1998

Table 6.4: The UK Public House Bar Food and Snacks Market (£m), 1994-1998

Table 6.5: Number of Public Houses and Other Full Licence Holders in the UKÅ, 1990-1998

Table 6.6: Main Groups of Public House Owners (number of pubs), 1992-1998

Table 6.7: Leading Multiple Public House Owners by Number of Outlets, 1999

Table 6.8: Leading Public House Brands, 1999

Table 6.9: Frequency of Visits to Public Houses ( percent of all adults), 1997-1999

Table 6.10: Penetration and Profile of Public House Users by Age, Social Grade, and Region ( percent of all adults), 1999

Table 6.11: Breakdown of Users of Public Houses by Age, Social Grade and Region ( percent of adults), 1999

Table 6.12: Frequency of Visits to Wine Bars ( percent of all adults), 1999

Table 6.13: Penetration and Profile of Wine Bar Users by Age, Social Grade and Region ( percent of all adults), 1999

Table 6.14: Forecast Number of UK Public Houses Market by Value (£m and number of pubs), 1999-2003

Table 6.15: Forecasts of the UK Public House Bar Food and Snacks Market (£m), 1999-2003

Hotels

DEFINITION

KEY TRENDS

MARKET SIZE

INDUSTRY STRUCTURE

MAJOR PLAYERS

ADVERTISING AND PROMOTION

BUYING BEHAVIOUR

FORCASTS

Table 7.1: The UK Hotel Market by Value (£m), 1994-1998

Table 7.2: The UK Hotel Market by Sector (£m and percent), 1998

Table 7.3: UK Budget Hotels - Leading Brands/Operators, 1998

Table 7.4: Number of UK Hotel Businesses, 1993-1998

Table 7.5: UK Hotel Businesses by Turnover (number and percent), 1998

Table 7.6: Leading UK Hotel Groups by Number of Hotels, 1999

Table 7.7: Main Media Advertising Expenditure by Leading Hotel BrandsÅ (£000), Year to June 1997-1999

Table 7.8: Main Media Advertising on Selected Hotel Brands (£000), Year to June 1998 and 1999

Table 7.9: Adults in Great Britain Staying in UK Hotels in the Previous 12 Months ( percent adults), 1999

Table 7.10: Penetration and Profile of Weekend Visitors to UK Hotels by Age, Social Grade and Region ( percent of all adults), 1999

Table 7.11: Penetration and Profile of Midweek Visitors to UK Hotels by Age, Social Grade and Region ( percent of all adults), 1999

Table 7.12: Penetration and Profile of Visitors Staying 4 Nights or More at UK Hotels by Age, Social Grade and Region ( percent of all adults), 1999

Table 7.13: Forecasts of the UK Hotel Market (£m), 1999-2003

Contract Catering

DEFINITION

MARKET TRENDS

MARKET SIZE

INDUSTRY STRUCTURE

MAJOR PLAYERS

BUYING BEHAVIOUR

FORECASTS

Table 8.1: The UK Market for Contract Catering by Value (£m), 1994-1998

Table 8.2: The UK Contract Catering Market by Sector by Value (£m at rsp and percent), 1998

Table 8.3: The UK Contract Catering Market by Number of Outlets, 1994-1998

Table 8.4: The UK Contract Catering Market by Number of Meals Served (millions), 1994-1998

Table 8.5: The UK Contract Catering Market by Number of Businesses, 1990-1998

Table 8.6: Number of UK Contract Catering Businesses by Turnover (number and percent), 1998

Table 8.7: Leading Companies in the UK Contract Catering Market by Turnover (£m), 1998

Table 8.8: Average Weekly Spending by UK Households on Workplace and School Meals (£), 1994/1995-1997/1998

Table 8.9: Forecasts of the UK Contract Catering Market by Value (£m at rsp), 1999-2003

Other Catering Markets

INTRODUCTION

LICENSED CLUBS

HOLIDAY CAMPS, CARAVAN AND CAMPING SITES

Table 9.1: Licensed Clubs Catering Market by Value (£m), 1994-1998

Table 9.2: Frequency of Visiting Licensed Clubs ( percent of adults), 1999

Table 9.3: Penetration and Profile of Licensed Club Users by Age, Social Grade and Region ( percent of all adults), 1999

Table 9.4: Forecasts of the UK Licensed Clubs Catering Market by Value (£m), 1999-2003

Table 9.5: The UK Holiday Camp, Caravan and Camping Site Catering Market by Value (£m), 1994-1998

Table 9.6: Number of Holiday Camps, Caravan and Camping Sites by Turnover (number and percent), 1998

Table 9.7: Main Media Advertising Expenditure by Holiday Camps, Caravan and Camping Sites (£000), Year to June 1997-1999

Table 9.8: Forecasts of the UK Holiday Camp, Caravan and Camping Site Catering Market (£m), 1999-2003

Strengths, Weaknesses, Opportunities and Threats (SWOT)

STRENGTHS

WEAKNESSES

OPPORTUNITIES

THREATS

The Future

FUTURE PROSPECTS

FORECAST 1999 TO 2003

MARKET SEGMENTATION

Table 11.1: Forecasts of Overseas Tourists to UK and Domestic Tourism in Britain (number and £m),1998-2003

Table 11.2: Forecasts of the UK Catering Market by Value (£m), 1999-2003

Table 11.3: Forecasts of Sales Within the UK Catering Market by Sector (£m), 1999-2003

Further Sources

ASSOCIATIONS

PERIODICALS

DIRECTORIES

GENERAL SOURCES

HOPPENSTEDT BONNIER INFORMATION SERVICES

GOVERNMENT PUBLICATIONS

OTHER SOURCES

Text © 1999 Key Note

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Last updated by Jacob van Eldik 22th January 2000