Presented by Peter Backman

7 March 2018

Exploring opportunities in the UK Market

UK Foodservice Market

– Overview and Trends

At these

levels

• C Suite

• Strategy

• Investors

National and international

2 Investors

3 1 Operators

I enlighten.

Suppliers

Key topics

• Overview of foodservice in the UK:

• Size

• Structure

• Routes to market

• Trends

• Demonstrate what is available:

• Data

• Insight

• Understanding

Foodservice in the food selling context

Retail 72%

Institutions

Foodservice

(inc Institutions) 28%

Total Food and Drink: £155 billion in 2014

Foodservice • Restaurants

• Quick Service Restaurants

• Pubs

• Hotels

• Leisure

• Staff Catering

• Health Care

• Education

• Services

Retail • Mults

• Independents

• C-Stores

• Off Licences

Institutions • Schools

• Hospitals

• Universities

• Military

• Prisons

Source: IGD, Market Structure and Trends 2014

Different sectors - different customer needs

• Quick Service Restaurants • Pubs • Restaurants

• Hotels • Leisure

• Staff Catering

• Health Care • Education • Services

• Destination outlet – Primary

need for customers going there to eat

• Eating is not main reason for visit - Secondary need is to eat whilst there

• Eating is not main reason for

visit – Tertiary need. Low costs are a key driver

Sector Customer need

Contract Catering – an overview

Staff

Catering

Examples

• Attractions

• Wimbledon

Examples

• Canteens

• Government

Leisure

Examples

• Hospitals

• Care homes

Health

Care

Education

Services

Examples

• Armed Forces

• Prisons

Examples

• Schools

• Universities

Contract caterers

The UK foodservice market – Food purchases

£0

£1

£2

£3

Restaurants QSR Pubs Hotels Leisure Staff

Catering

Health care Education Services

Fo

od

pu

rch

ase

s (£

billio

ns)

Source: Market Structure and Trends

Primary need

Secondary need

Tertiary need

Dark: Group

Light: Independent

0

400

800

1,200

1,600

2,000

£ F

&B

Sa

les

£ M

illio

n

The Top 15 Players • These companies represent 36% of

the F&B sales of the total market • Global players dominate with 5

players • UK Pub Groups follow with 4 players

Source: Key Brands

Fastest growing small brands % growth in estate numbers – 2014-2017

Rank

(Nov 2016 in

grey)

Brand Type of offer Estate - Number of outlets Growth rate (%

change in outlet

numbers 2014-

2017)

2017 2016 2015 2014

1 15 Black Sheep Coffee shop 19 13 4 2 850%

2 42 7Bone American barbecue casual 8 2 2 1 700%

3 3 Mi Casa Burritos Mexican burrito quick service 6 6 4 1 500%

8 Synge & Byrne Coffee shop 6 6 3 1 500%

5 4 Thaikun Thai casual dining 11 8 6 2 450%

6 5 Sprinkles Gelato Ice cream quick service 16 11 6 3 433%

7 7 Bea’s Patisserie quick service 5 5 1 1 400%

13 Taco Bell Mexican burrito quick service 20 11 7 4 400%

9 9 Patty & Bun Burger fast casual 9 6 3 2 350%

10 20 Churchill’s Fish & Chips Fish & chips quick service 13 8 3 3 333%

What is a One To Watch

brand?

• Restaurant/QSR

• 5-25 sites • >20% growth over

past 3 years

Who decides? Who influences? • Customers

• Individual

• Party

• Independent operators • Chef

• Owner

• Cash & carry visitor

• Group operators • Unit? Head office?

• Development chef

• Ops

• Marketing

• Buyers

• Committee? Individual?

• Contract caterers • Contractor

• Purchasing consultant

• Client

• Customer

• Cost sector • Chef

• Head teacher

• Parents

• Pupils/Patients/Prisoners

• Buying consortia

• Distributors • Buyers

• Marketing

• Sales

• Logistics

Operators spend £17 billion each year on …

Food

Cold drinks

Non-food consumables

Equipment

Source: Horizons

Food: £11.1 bn

Source: Market Structure and Trends * Flash estimates

Food: £11.1 bn

Ambient

Chilled

Fresh

Frozen

At what temperatures do operators buy food?

Source: Horizons

Source: Market Structure and Trends * Flash estimates

Food: £11.1 bn

Where do operators buy their food?

Source: Horizons

Source: Market Structure and Trends * Flash estimates

Delivered Wholesaler

Contract Distribution

Cash and Carry

Others inc Retail

Regional Distributors * Examples • Creed

Routes to Market – a summary

Independents Groups

Suppliers – Manufacturers – Primary Producers – Importers etc

National Distributors Examples • Bidfood

• Brakes

Examples: • Keystone • Bidfood Logistics

Delivered

Wholesale Cash &

Carry Contract

Distribution Retail /

Other

Examples • Supermarkets • Wholesale

markets

*Some regional distributors are

part of Buying Groups / Consortia

such as Caterforce

Examples • Booker • Bestway

Source: Market Structure and Trends

• Fragmented

• Top 3 have 48%

• Brakes

• Bidfood

• Booker

• The next 6 have 13%

• But

• Sector/temperature concentration

Brakes

Bidfood

Booker

Country Range

Caterforce

Reynolds

JJ

Fairfax

Fairway

Other contract

All Others

The major players in food distribution

The Foodservice Universe

Top Trends to look out for

• Street food

• Breakfasts

• Coffee (not just in coffee shops!)

• Lunchtime price points

• Meal Deals

• Personalisation

• Grab ‘n’ go

• Fast service techniques

• ‘Health/lifestyle’ options, especially Free From and Provenance

• Vegan, vegetarian

• Use of technology for marketing, service etc.

• Delivery

Almost unbroken upward trend in food sales

value

0

5

10

15

20

25

30

35

40

£ B

illio

ns

Food sales at current prices 1981 - 2016

4.7% CAGR

Source: Market Structure and Trends

-12

-10

-8

-6

-4

-2

0

2

4

6

8

10

J A J O J A J O J A J O J A J O

2014 2015 2016 2017

Ba

lan

ce

of

po

siti

ve

an

d n

eg

ative

re

spo

nse

s

(%)

Consumer confidence

£20,000

£22,000

£24,000

£26,000

Real median earnings

Historical

Forecast March 2016

Forecast November 2017

The consumer is reluctant

Sources: Eurostat, OBR, IFS

Less to spend

Less confident

Overall eating out – pointing downward

90

95

100

105

110

Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar

2017 2018

Tracker Tracker

Tracker Tracker

Trend with 3 month forecast

(polynomial)

In development

Multiple sources eg

• NPD CREST

• Consumer confidence

• BRC

• Coffer Peach Tracker

• Markit Services Purchasing Outlook

• Asda Tracker

• Etc

Source: Peter Backman

Margins are being squeezed – returning to 2010

Source: ONS, Peter Backman

-10%

-5%

0%

5%

10%

15%

JMMJ SNJMMJ SNJMMJ SNJMMJ SNJMMJ SNJMMJ SNJMMJ SNJMMJ SNJMMJ SNJMMJ SNJMMJ SNJMMJ SN

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Margin squeeze

Input prices

Output prices

Casual dining Healthy

Fast casual

Breakfast

Some growth sectors

Lunch

Coffee Shops

Changes to operating patterns

• Reduced need for restaurant

space

• Distribution becomes efficient

• More “Dark kitchens”

Delivery – a 2 way disrupter

Losing contact with the customer

• “Man on a bike with a bag”

• Not “like real life”

• Not always “immediate”

• Impact on the brand?

Delivery in total … and share of total foodservice

Market size in 2017

£6.7 billion

Growth since 2011

+8% CAGR

Forecast market size in 2018

£7.5 billion

4 models: Share of system sales 2017

Traditional pizza Traditional independent

Aggregator Aggregator deliverer 0%

20%

40%

60%

80%

100%

Delivery share of total value of

foodservice: 2017

Non-

commercial

sector

Rest of

Commercial

sector exc

Delivery

Delivery

Source: Peter Backman

Note: Values are at nominal operator

selling / consumer buying prices, or

aggregator sales prices

Note: Brand logos are shown as

examples only

Note: Commercial sector: restaurants,

quick service, pubs, hotels, leisure. Non-

commercial: staff feeding, institutions

* Flash estimates

How will Brexit play out in foodservice?

The unexpected – is very

likely

“No battle plan survives contact with the enemy”

Helmuth von Moltke

Danger of arguing from

“known knowns”

• Time scale • Medium term to March 2019:

• Brexit negotiations

• Long term: • The next 15 years

What happens to:

• Immigration

• Falling / volatile £

• Consumer confidence

• Brexit-induced effects on the UK economy

• Government investment

• Trade arrangements

• Changes in food law / regulations

• Changes in duties / taxes

• Private sector investment in foodservice

• London

• Foodservice trading

Opportunities for exporters

• Offer advantages:

• Price

• Quality

• Consistent supply

• Take advantage of new taste / product trends

• Follow your national restaurant chains into the UK

• Bring another “dimension” of understanding – new ideas

Thank you

T: +44 (0)844 800 0456 M: +44 (0)7785 242809

E: peter@peterbackmanfs.com

Tw: @PeterBackmanFS

www.peterbackmanfs.com

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1 Ballards Lane

London N3 1LQ

How to contact me