Despite challenging economic conditions, the foodservice industry shows promising signs as we enter 2024, with many chains reporting robust sales growth. Personal experiences echo this sentiment; recent outings in central London found it difficult to secure a table without a reservation.
Delving deeper into the numbers reveals that a significant portion of this sales growth stems from food service price inflation, surpassing both general inflation rates and those specific to the food sector. While the Office for National Statistics (ONS) notes a decrease in general price inflation to 4% in December (with a forecasted further decline to 3% in 2024), food and non-alcoholic beverage prices have doubled that rate, reaching 8% in the year leading up to December.
Meaningful Vision’s analysis meticulously tracks price fluctuations across menus offered by the UK’s top 100 chains, encompassing fast food, fast casual, casual dining, and coffee shops. Notably, the fast-food sector’s price increases outpace general food inflation, hitting 12% in December.
This inflationary pressure is driven by multiple factors, including rising costs of labor, energy, insurance, and construction, which collectively account for around 70% of operational budgets. Although December’s 12% price growth marks an improvement from the first quarter of 2023’s 20% rate, it remains concerning when contrasted with the nominal 4% general inflation rate reported by the ONS.
While average weekly earnings in November saw a 5% increase, indicating a growth in real incomes, lower-income demographics face a disproportionate impact from rising food and energy costs. As a result, their purchasing power diminishes despite wage growth, aligning more closely with food and beverage inflation rates.
Looking beyond inflationary effects, consumer traffic data provides valuable insights into performance, revealing resilience and loyalty among customer bases. Among the top 100 chains, including fast food outlets, coffee shops, casual dining restaurants, and pubs, a slowdown from 2% growth in Q1 to a 3% decline in Q4 reflects the pervasive cost-of-living crisis affecting consumer confidence.
Despite nationwide footfall declines, certain segments benefit from workers returning to office environments, driving growth in central city areas and specific chains like coffee shops and bakeries. Yet, intensified competition demands bold and innovative sales strategies informed by comprehensive market knowledge and swift adaptability.
In this demanding landscape, data-driven decision-making emerges as a crucial tool for foodservice retailers, offering protection against market volatility and fostering customer loyalty for sustained growth. Maria Vanifatova, CEO and founder of Meaningful Vision, champions this approach, leveraging the company’s expertise in pricing, promotion, location, and traffic data to empower the UK foodservice industry. As a former Vice President and head of European Foodservice Practice at The NPD Group (Now Circana), Vanifatova brings a wealth of experience to drive Meaningful Vision’s mission forward.
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