With more consumers inclined to stay – and hence dine – in, the foodservice sector is going through a tough time.
The foodservice/’eating out’ industry has experienced a tough few years, especially in markets such as the UK. Owing to economic pressures and the subsequent contraction in consumer spending, more people are inclined to stay in instead of going out. As a result, expenditure has switched from out-of-home to in-home dining, a trend which seems set to persist despite the fact that the economic situation is now improving. During the last year, for example, 45% of UK consumers claimed to have had more nights in, while almost 40% now do more entertaining in the home. Further evidence of the tough economic climate is the widespread use of discounting methods by foodservice operators. Despite trends such as these, Western Europe still has a large foodservice industry. Sales of food and drink via out-of-home establishments (e.g. pubs, restaurants, hotels, fast food chains and commercial catering outlets) were worth an estimated EUR312bn in 2012. This figure includes the region’s six largest markets in value terms, i.e. the UK, France, Germany, Italy, Spain and the Netherlands.
France has Western Europe’s largest foodservice market in value terms, with sales worth an estimated EUR78bn in 2012. This drops to EUR72bn in Italy – as a result, these two countries account for 25% and 23% of the regional total respectively. The German foodservice market is worth an estimated EUR60bn, a figure which drops to EUR44bn in the UK and EUR40bn in Spain. It should be noted that other data exists which differs according to source and definition – for example, Allegra Strategies valued the UK foodservice and hospitality market at more than EUR90bn in 2012. Quick service restaurants (QSRs) remain a strong feature of the European foodservice industry – for example, this sector accounts for almost 40% of sales within the regional market, ahead of contract caterers (28%). The share of the eating out market taken by QSRs amounts to a sizeable 56% of the German market, while chain operators account for 58% of visits to UK foodservice establishments – favourites include McDonalds, KFC, Pizza Express and Nando’s. Pubs continue to perform well within the UK foodservice market, having adapted to tougher trading conditions through the introduction of varied menus and value-for-money deals.
Frozen Food Trends
Frozen foods remain an important component of expenditure by the major foodservice operators, together with ambient and chilled varieties. In the UK, for example, data from research organisation Horizons indicates that total food purchases by the foodservice industry (which includes establishments such as pubs, restaurants, hotels, contract caterers and other institutional outlets) amounted to GBP10.14bn in 2011. The frozen foods market accounted for 22% of this figure, with sales worth just over GBP2.2bn. This latter figure has been static for some time now, reflecting the depressed state of the UK economy and its subsequent effect upon eating out by consumers. According to most recent data from the British Frozen Food Federation (BFFF), the foodservice sector accounts for 45% of the UK frozen foods market, with retail sales accounting for the remaining 55%. As can be seen from Figure 1, ambient varieties accounted for a leading 34% of food expenditure by UK foodservice operators in 2011, equivalent to sales worth almost GBP3.5bn. This figure drops to GBP3.2bn for short-life chilled foods and GBP1.2bn for long-life chilled foods, with historical data suggesting that the share of expenditure taken by frozen foods has declined in recent years.
During 2011, restaurants accounted for just over half (51%) of foodservice expenditure on frozen foods, ahead of pubs and hotels (29%) and contract/institutional caterers (20%). Some indications of UK consumer preferences (and hence the more popular frozen foods amongst foodservice operators) as far as eating out is concerned can be gleaned from Horizons’ latest Menurama report. The latest version (which appeared in the summer of 2013) analyses menus from foodservice establishments such as pubs, restaurants and fast food outlets on an ongoing basis. Beef burgers remain a favourite with UK consumers, despite the adverse publicity the sector attracted earlier in 2013 courtesy of the horsemeat scandal. Other growth areas of late have included steaks and American-inspired dishes, such as Ribs, Hot Dogs (often served with a ‘gourmet’ twist) and Pulled Pork. In contrast, meals such as Beef Lasagne, Chicken Curry, Mixed Grills and Scampi are now a less common feature on UK foodservice menus.
Despite the apparent growth in popularity of burgers and steaks, it should be pointed out that average weight per portion has declined, which means that dishes are now featuring less meat per serving. Although lunch and dinner occasions currently account for over 80% of the UK eating out market, considerable opportunities are thought to exist for food manufacturers within the expanding breakfast sector. At present, breakfast occasions account for 9% of the UK eating out market (equivalent to sales worth just under GBP3bn per year), although the sector increased by more than 4% during the course of 2012. As far as frozen food manufacturers are concerned, this trend is likely to create opportunities for suppliers of products such as bacon, potato products (e.g. hash browns) and a variety of bakery goods.
Meat products on top
Meat and meat products account for a sizeable chunk of the UK market for frozen foods bought and served by foodservice establishments. In 2012, sales of pig meat via UK foodservice establishments amounted to more than 1.7 billion servings. This can be segmented into bacon (738 million servings), sausages (535 million servings), ham (283 million servings), pork (115 million servings) and ribs (44 million servings). As can be seen from Figure 2, bacon and sausages account for a combined 74% share of all pig meat servings in the UK foodservice industry in volume terms. The foodservice sector therefore accounts for a sizeable percentage of eating occasions of pig meat in the UK – for example, out-of-home servings account for over a fifth (21%) of all sausages eaten every year by volume.
During 2012, servings of beef via UK foodservice outlets amounted to 1.3 billion, a figure which decreases to under 200 million for lamb. In each instance, it is thought that considerable quantities of meat are purchased in frozen format by foodservice operators. Moving to France, the frozen sector accounted for over a quarter (27%) of all food purchases by foodservice operators within the last year. This equates to sales worth approximately EUR4.3bn, a figure which compares with around EUR9.25bn for fresh foods and EUR2.4bn for ambient/shelf-stable goods. Meanwhile, Italian foodservice operators spend more than EUR2.4bn per year on purchases of frozen and chilled foods. One of the major sectors within the Italian market is frozen potato products – in 2012, volume sales of these products via the foodservice sector amounted to almost 55,000 tonnes.
Suppliers
Many of Europe’s largest suppliers of frozen foods service the foodservice market, alongside retail and own-label customers. This is apparent in major products sectors such as fish, poultry, meat and potato-based products, although the share of turnover taken by the foodservice sector varies from company to company. As one of the world’s leading producers of frozen foods, McCain Foods commands a sizeable presence in the foodservice sector. In the UK, for example, the company supplies customers in markets such as pubs, restaurants, hotels, fast food outlets, educational establishments (e.g. schools and universities) and workplace caterers. Many recent corporate developments have influenced the company’s foodservice operations – for example, its 2012 acquisition of European-based chilled potato products manufacturer of CelaVita increased its customer network in the Benelux countries.
McCain’s UK foodservice range includes a variety of potato-based products such as oven chips, wedges, croquettes, waffles, mash and hash browns, as well as new Signature Roasts. These roast potatoes are described as offering a more authentic look and taste, as well as reduced cooking time. In addition to potato products, McCain’s foodservice portfolio also includes other frozen foods, such as battered onion rings, vegetable burgers and pizza. As is the case with its retail range, the nutritional profile of many of its products has been improved in response to consumer demands, and provenance is frequently mentioned during promotional efforts. One of McCain’s main rivals within the European foodservice industry is Lamb Weston, which is owned by the US-based ConAgra Foods and operates manufacturing units in the UK and the Netherlands. The company’s Foodservice business has introduced innovative products such as Generation 7 Fries and Stealth Fries, whilst more recent launches have included Sweet Things (products based on sweet potato) and Tantalisers, a range of appetisers and snacks such as onion rings and breaded cheese and vegetables. Other suppliers of frozen potato products to foodservice operators include Aviko (which recently introduced Sweet Potato Fries in the UK) and Agrarfrost of Germany.
In the meat and poultry products sector, major suppliers to the European foodservice industry include Cargill Meats Europe, which forms part of the agricultural and ingredients multinational Cargill and counts McDonald’s as one of its main customers. UK-based turkey producer Bernard Matthews also has a sizeable foodservice operation, supplying catering outlets such as schools and pubs. As is the case with its retail portfolio Bernard Matthews offers 100% traceability on all of its turkeys, and its range is now marketed as being free from artificial additives and ingredients. In the Netherlands, Plukon Food Group supplies customers in both the retail and foodservice industries, and slaughters approximately 6.5 million chickens and turkeys per week. Another Dutch-based company which is worthy of mention is Vion Food Group, which supplies both red meat and poultry meat, although its UK-based business was sold off to Boparan (the holding company for 2 Sisters Food Group) in 2013.
Elsewhere, PHW of Germany operates Wiesenhof Gastroservice, which supplies the German foodservice market with primarily chicken and turkey-based products. Birds Eye of the UK also operates a dedicated foodservice business, which supplies customers in sectors such as pubs, restaurants and educational establishments. It manufactures products such as frozen coated fish and seafood (e.g. fish fingers), as well as frozen vegetables and red meat products. One of its rivals within the UK market is Young’s, which is owned by the Findus Group. The Young’s for Chefs range includes a number of frozen fish and seafood products, including coated varieties which appear under the Ross brand and are targeted at educational establishments. These have a healthy positioning, since some are oven-baked (and therefore not pre-fried), as well as being a natural source of omega-3s.