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EXECUTIVE SUMMARY
The British foodservice market is among the most modern and concentrated in Europe. However, since 2008, the United Kingdom (U.K.) has changed from a booming economy to an economy in crisis, which has impacted the consumer foodservice market. In this fast-changing environment, up-to-date market and consumer data is more critical than ever. A Shift in the British Foodservice Sector The consumer foodservice sector continued to be affected by the economy in 2010. Falls in disposable income and rising unemployment resulted in a tough trading environment since 2009, leading to limited growth in foodservice value sales and a decline in outlet numbers, as operators struggled to keep up with the increasing costs of ingredients and rent. As a means to remain in business, foodservice operators sought opportunities to attract cash-strapped consumers with promotional vouchers and discounts. Pizza Express, Zizzi and Bella Italia were among those that offered buy one, get one free meals, among other offers, as operators competed with ready-meal deals offered by supermarket chains, which would allow consumers to spend less by staying in. Due to the number of outlets present in the market, cafs/bar operators, better known as pubs in the U.K., have maintained a strong presence, despite the economic downturn. Meanwhile, both chained and independent operators struggled due to declines of over 2% in 2009 (Euromonitor). Losses stemmed from rising rent and utility costs, alongside a decline in consumers dining out. Like most markets, chained 100% home delivery/takeaway flourished in this difficult economic environment, alongside smaller niche, less-developed subsectors and affordable options such as chained Middle Eastern fast food and chained specialist coffee shops. Market Outlook Private consumption has held up reasonably well since mid-2009, but the outlook for foodservice operators and consumers appears increasingly grim. With the struggling private sector and public sector cuts, the unemployment rate is set to continue rising into 2011. As a result, with the economy still uncertain, smaller/independent operators are likely to be driven out of the market. Meanwhile, highend restaurants have also taken a hit, leaving mid-level restaurants to benefit. Since the British are accustomed to eating out, often due to a large number of single occupant households, they are likely to consume more ready-meals instead, and are expected to continue eating out less often.
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In addition, grocery retailers such as Marks & Spencer began offering meal deals to consumers, such as Dine In for 10, which in turn affected the restaurant business. These meal deals combined with the numerous cookery shows and food-related advertisements, continued to tempt consumers to stay home more often for a low-cost dining experience. The economy continues to struggle in the U.K., as the unemployment rate continues to rise. In March 2010, the unemployment total was at its highest level since December 2004 (Euromonitor). Consumer sentiment is unlikely to improve following the October 2010 announcement of the coalition governments comprehensive spending review, and as a result of concerns over a renewed slump in the U.K. housing market. The fiscal tightening program has set out projections showing an estimated 490,000 public-sector job losses, resulting in increased fear over job security across many areas of the economy, which are likely to weigh on spending plans for some time (Viewswire The Economist). Following an estimated rise of 1% in 2010, the Economist Intelligence Unit expects private consumption growth to slow to a mere 0.2% in 2011, as the official measure of unemployment starts to trend higher. A fragile economic recovery has forecasters seeing a 1.7% expansion of the countrys real gross domestic product (GDP) in 2010, slowing to 1.3% in 2011 (Viewswire The Economist).
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$180 $160 $140 $120 $100 $80 $60 $40 $20 $2006 2007 2008 2009 2010
2,500,000.00
2,000,000.00 144,231.95
165,999.96
1,500,000.00
1,000,000.00
500,000.00
Year
Source: Planet Retail, HoReCa Market United Kingdom, July 2010
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Company
Punch Taverns McDonald's Mitchells & Butlers Whitbread JD Wetherspoon Yum! Brands Greggs Subway Domino's Pizza Starbucks Gondola Group Burger King Restaurant Group Carlson Papa John's Dunkin' Brands HMV Church's Chicken Grupo Zena Lincolnshire Co-operative
Company
Punch Taverns Subway Mitchells & Butlers Greggs Yum! Brands Whitbread McDonald's JD Wetherspoon Gondola Group Domino's Pizza Starbucks Burger King Restaurant Group Nando's Dunkin' Brands Papa John's Carlson Quiznos Church's Chicken Grupo Zena
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groups in the country, encompassing Chiquito, Frankie & Bennies, Garfunkels, Home Country, TRG Concessions, and Brunning & Price) Gondola Holdings plc (the leading U.K. casual dining group operating Pizza Express, ASK, Zizzi, BYRON and Kettners, together with a number of smaller brands.) Clapham House Group (The Real Greek, Gourmet Burger Kitchen) The Giraffe Restaurant Group Boparan Ventures (Harry Ramsdens fish and chips chain as well as the Fishworks seafood restaurants) Tragus (Caf Couge, Bella Italia, Strada, and Brasseries) Wagamama Busaba Eathai Mitchells and Butler Whitbread Restaurants Future Prospects British market operators are mostly concerned with what will be the next big trend in the U.K. Organic and localization trends are increasingly important, but the media may overstate their impact. With the E.U. population expanding, examining the next wave of immigration may be useful. Perhaps food from Eastern Europe or Asia may begin to influence the U.K., particularly where operators can promote a healthy or functional aspect to the menu. Finally, operators should be worried about the ongoing economic concerns that are expected to limit growth in the U.K., as promotions and discounting continue to entice consumers to eat out, yet not increase spending. Another growing trend is that of restaurant chain brands being sold not only in restaurants, but also at grocery chains. For example, Wagamama has developed four sauces which are sold in Wagamama restaurants as well as approximately 400 Sainsbury's stores. In a highly fragile environment, growth through expansion can be risky and expensive, and expanding into new sales channels represents an attractive alternative to the traditional growth model of opening new restaurants. The growth of new sales channels also represents an opportunity for manufacturers as restaurant chains seek companies to produce the food ranges in their name. Furthermore, the British tourism agency VisitBritain predicts tourist spending is set to double by 2020, while Deloitte and Oxford Economics have forecasted a 4.4% increase in tourism expenditure in the next 10 years. With London hosting the Olympic and Paralympic Games in 2012, full-service restaurants, and the foodservice industry as a whole, is set to be revitalised.
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Some of the larger fast food operators have continued to strongly support other menu items outside their traditional businesses of burgers, sandwiches, chips and chicken. McDonalds, for example, has established its coffee offering in the U.K., despite strong competition from specialist coffee shops Starbucks and Costa Coffee. Meanwhile, breakfast trade continues to be viewed as an untapped revenue source. Recent regulations banning fast food operators from advertising to children on British television have encouraged players to adapt their marketing strategies to fit the more limited environment. Healthier menus have been the major trend in recent years and fast food operators have been competing with each other to advertise this shift to foods with lower fat and salt content. Prt a Manger, EAT and Greggs have linked up with the FSAs voluntary healthy eating campaign. Prt a Manger pledged to apply new calorie labelling on its sandwiches and reduce the level of salt. Greggs pledged to remove all hydrogenated fats and artificial colours and flavours from its pies by summer 2010. These recent initiatives follow earlier moves by KFC, Burger King, McDonalds and Subway to conform to the FSAs voluntary standards.
Similar to cafs, quick service restaurants, also known as fast casual dining, offer a quick meal on the go, but lack the social element of a caf. Fast casual dining represents a growing segment of the fast food sector, showing the fastest growth in recent years. This growth has been driven by the segments healthy perception among British consumers, as well as the expansion of players such as Nandos, Prt a Manger and EAT, which all saw doubledigit store growth in 2009. Bakery retailers and sandwich specialists are both quite popular in the U.K. Mixed bakery retailers offering a range of sandwiches and baked goods dominated the sector, aided by Greggs, which significantly increased its offering as part of recession-busting meal deals. Sweet bakery goods specialists, although still a fraction of bakery products fast food, have seen solid growth underpinned by the expansion of Krispy Kreme, which is now sufficiently established in the U.K. Meanwhile, sandwich specialists, led by Prt a Manger, Subway and EAT, lost share in 2009 with sweet bakery goods specialists increasing their share of the market. Since the 1990s, sandwiches had been a major growth sector, with the working population opting for shop-bought sandwiches as opposed to homemade ones. Although the total number of sandwiches sold has decreased in recent years, value sales have remained sustainable due to a variety of price-points. Major players in the sandwich shop sector are Greggs network of sandwich shops, Subway, Upper Crust, OBriens, Benugo, and Benjys. Another important channel to consider in the sandwich market is that of petrol forecourt operators. Chicken fast food operators maintained their presence in the U.K. with players such as Nandos, KFC, Dixies, and Chicken Cottage, continuing to prove themselves attractive to many middle-income families forced to trade down from full-service restaurants. Some players demonstrated a healthier offering (Nandos) or halal-natured menu (Chicken Cottage), while others offered an attractive value deal (KFC). KFC remains the market leader within the fried chicken segment; other players include Favourite Fried Chicken, Chick King and Southern Fried Chicken. Fish and chips shops are another known segment in the British market and remain a great British tradition as well as an important area of the fast food industry. This segment has, however, decreased in size since the 1970s due to the availability of other fast foods, the perception that fish and chips are unhealthy, and the expanding range and quality of frozen fish and chip products available in supermarkets. Ice cream outlets are another form of fast food. Today, ice cream chains are more likely to be international chains located in shopping centres and cinemas. Some of the U.K.s biggest players are Baskin-Robbins (Dunkin Brands), Hagen-Dazs, Ben & Jerrys, and the specialist chocolate retailer Thorntons. In terms of the food versus drink distinction, the latter has gained share. The growth of drinks in this sector can be explained by the rising quality of hot drinks in fast food outlets such as McDonalds, Greggs and Prt a Manger. Many fast food brands are experiencing greater coffee sales, benefiting as consumers shift away from more expensive coffee shops such as Starbucks..
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Future Prospects With fast food increasing in popularity, expansion is set to be a key trend in the medium term. Players such as KFC, Greggs, Nandos, Prt a Manger, EAT and smaller brands such as Leon, Paul and Wasabi all have ambitious plans to expand over the coming years. Furthermore, many of these brands already have the funding in place to do so. The U.K.s fragile economy is less of a threat to chained fast food operators than it is to independent players, who may continue to struggle in the medium term. The fast food sectors biggest threat is the take-away outlets which continue to grow at a rapid rate and which have established a solid business competing on value and increased convenience through such innovations as text ordering. Other competitors are cafs/bars, which offer a range of food and drink as well as longer kitchen hours as they attempt to compensate for lost alcohol sales with increased food sales. Forecasts for the fast food sector are expected to be flat in value terms up to 2014. The better sales performance of bigger chained brands will counterbalance the long-term sales and outlet decline of independent fast food operators, which will be squeezed out further by economic uncertainty. Moreover, according to Euromonitor, fast casual dining is predicted to be the fastest-growing fast food category. The upcoming 2012 Olympic Games as well as the predicted increase in tourism will have a positive impact on the British foodservice sector with some focus on fast food. With McDonalds as a principal sponsor of the Olympics, they are expected to reap much of the benefits, however, there will be spin-off benefits for other fast food operators and the challenge ahead will be how best to capitalize on the worldwide event. Further price competition from the likes of take-away and cafs/bars operators, as well as the rising cost of raw materials and static rent prices, will continue to affect independent operators in the medium term. These increased costs will be extremely difficult to pass on to consumers, as competition on price becomes the norm.
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Pubs and Bars As part of the cafs/bars sector, pubs had always been a popular outlet in the U.K. However, as a result of an unsteady economy, pubs continue to close at a steady rate, as reported by the British Beer & Pub Association (BBPA). The BBPA also indicated that pubs with a shared focus between food and drink faired better than those classified as drink led. According to Planet Retail, there are currently 60,000 pub enterprises trading in the U.K., with more than three-quarters of them serving food. The majority of these rely on snack food, while some larger players have considerably expanded their food offering. Many pubs have gone from pre-cooked and frozen foods to more cosmopolitan and even ethnic food, thereby appealing to a larger market segment. Meanwhile, beverage consumption has also changed with a shift from beer to wine. Some of the larger operators, such as Mitchells and Butlers Plc, Greene King Plc, and JD Wetherspoon, have continued to generate profit as a result; pubs have become a cheap and informal foodservice destination for family dining. Low prices and price promotions are some of the main differences between restaurants and pubs. Other prominent pub operators in terms of the number of leased and tenanted properties are Punch Taverns, Enterprise Inn, Admiral King, Wolverhampton & Dudley Breweries and Greene King. One of the sectors main concerns over the short term is the governments goal to reduce binge drinking in the U.K. Some direct outcomes that may affect pubs are a potential increase in the cost of alcohol and stricter rules, which will affect the segments growth in the long term. Specialist Coffee Shops As a general observation, the specialist coffee shop channel has grown exponentially. Specialists continue to launch company-owned and franchised chains, as well as many established retail and non retail businesses. Coffee shops in the U.K currently total 8,000, and are led by three major players: Starbucks, Costa Coffee (Whitbread) and Caff Nero. Other companies to bear in mind are Coffee Nation, AMT Espresso, and Puccinos. Competition is further heated by concession-based operations such as Caff Ritazza and food-led operators such as Prt A Manger and McCaf or EAT. Other indirect competitors include in-store restaurants and cafs, such as Marks & Spencer's Caf Revive, and pub operator JD Wetherspoon, which attempted to enter the coffee segment by offering affordable cappuccinos and early morning openings. In addition, juice/smoothie bars such as Boost and Revive juice bars, are increasing in presence nationwide, presenting themselves as a healthier alternative to coffee. However, unfavourable weather in the U.K. and cash-strapped consumers continue to constrain the potential of this segment. In a nation of avid tea drinkers, specialist coffee shops have grown in popularity and continue to experience growth. The coffee shop sector consists of outlets that serve hot and cold beverages, but no alcohol. They also serve snack foods such as cakes, sandwiches, soups and salads, although serving food is not their primary business domain. These players have expanded their range of food offerings in an attempt to compete with other foodservice operators, as well as to diversify their offering, allowing them to appeal to a larger consumer segment. Euromonitor has observed a great emphasis on increasing the selection of fresh pastries and baked goods, as well as coffee accessories and related products, on behalf of operators in this sector. Another key trend is the attention specialist coffee shops allocate to offering consumers a healthier proposition. According to Euromonitor, seven British foodservice operators have made public commitments to improve their food offering, including chained specialist coffee shop operators Starbucks, Costa Coffee, Caff Nero and BBs Coffee & Muffins. Popular Players in the Market
Scottish & Newcastle JD Wetherspoon Plc Punch Tavern Group Ltd. Enterprise Inns Plc Greene King Admiral Taverns Whitbread Plc (Costa Coffee) Starbucks Town & City Pub Company Yatess Hogshead Litten Tree Regent Inns (Walkabout, Jongleurs, etc.) Coffee Republic Arab Investments Ltd. BBs Coffee & Muffins Puccinos Cappucino Caf Nero Millies
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Future Prospects The combination of the U.K.s economic instability and the governments goal to reduce binge drinking will continue to play a role in the cafs/bars sector, however, growth in the specialist coffee shop sector is expected in the medium term. Trading is forecasted to remain difficult for pubs and bars; budget announcements of increased alcohol tax will continue to affect trading at more drink led operators. In addition, according to Euromonitor, the national chain Cadbury has entered the specialist cafs and bars sector, with Kraft Foods throwing its support behind it. The cafs were launched in the fall of 2010, offer afternoon teas along with a chocolate service, and could open as many as 60 locations nationwide over the next three to five years.
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Future Prospects British consumers have acted as homebodies in the last two years, hosting various home entertainment events such as the Six Nations rugby, the Ashes cricket and most importantly, the football World Cup in South Africa, all of which have contributed positively to the HDTS sector. In the medium term, HDTS operators will continue to see growth, though at a slower pace. The slowdown in both outlet and value growth owes more to the growing maturity of the market rather than any fundamental decline. Both chained and independent HDTS operators are forecast to show positive growth over the next five years with chains growing significantly faster due to players such as Dominos Pizza and their expansion plans. One of the main threats to the sector is a lack of internal investment by smaller operators, which have become complacent, and the ongoing improvement in terms of quality and choice of ready meals and even hot food from supermarkets/hypermarkets. According to Euromonitor, consumer trust of supermarkets/hypermarkets is high, and their offers are typically cheaper, healthier and clearly labelled. The one core difference is in the delivery of the goods, which will always help preserve a degree of growth in the sector. Another potential threat could also arise if HDTS operators fail to keep pace with technological advances, such as mobile and Internet ordering, as the U.K. becomes increasingly web-focused.
Future Prospects The economic volatility in the U.K. continues to affect the sector in both outlet and value terms, especially for independent, non-established brands. This slowdown is also a result of saturation in the market, with most prime sites being occupied, while new ones are being reserved by chained operators before plans of future locations are even announced. These trends will help drive an ongoing shift towards chained operators within this sector, to the detriment of independent players. Other threats to the sector in the coming months are rises in rental spaces. Moreover, there is also expected to be a lack of suitable sites. Although spaces will free up due to smaller independent operators exiting the sector, sites that offer meaningful traffic will become more expensive, as operators will seek to avoid the low turnover of many independent street stall/kiosk sites.
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A decline in public spending and the general publics price consciousness owing to the credit crunch, has seen demand increase for budget accommodations. Many budget hotels feature narrow foodservice offerings, often limited to vending machines if anything at all. Many travel budget hotels are located adjacent to pubs or restaurants. The significant rise in the budget sector is due to the popularity among business travellers and the competitiveness of prices in comparison to more upmarket hotels. Since the recession hit, people increasingly choose to vacation in the U.K. as a result of the weaker pound, thus allowing leisure outlets and hotels/accomodation and resorts to see increasing success. In addition, the weakness of the pound has led the U.K. to experience an increase in foreign visitors. As previously mentioned, tourist spending is set to double by 2020, and is expected to increase by 4.4% in the next 10 years. With London hosting the Olympic and Paralympic Games in 2012, the hotels/accomodation and resorts industry as a whole, is set to experience noticeable growth. Key players include: Hilton Hotels Corporation, Holiday Inn, Marriott, Intercontinental Hotels Group, Whitebread, The Savoy Group and Accor.
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Contract Catering
Growth has been slow in the contract catering sector, making it difficult to predict its future. One of the major trends has been the move towards healthier dishes and light grab n' go meals. Commercial formats such as kiosks, are also on the rise due to shorter lunch breaks in the U.K. Meanwhile, reductions in catering subsidies to clients and an under-investment in catering in both educational and healthcare facilities, are other issues currently being addressed by catering companies. These challenges have led to a trend towards fixed-price or guaranteed-cost contracts. The sectors leading companies are Compass, Sodexho and Aramark. Compass U.K. & Ireland serves clients in business and industry, education, healthcare, defence, remote sites and offshore sectors, and is also active in vending. Meanwhile, Sodexho provides food and support services to clients in the business and industry, education, healthcare, remote sites, corrections and defence sectors. The company further offers service vouchers and cards, as well as river and harbour cruises. The American company Aramark, the third-largest operator, operates in the business and industry, healthcare and seniors, defence, education, offshore and remote sites, and corrections sectors. However, Aramark also provides foodservice solutions to commercial clients including hotels, commercial restaurants, sport stadiums and arenas, theatres and entertainment venues through its Parallel division. Another notable player is Elior, which strengthened its position within the business and industry segment with new contracts and contract renewals. Other smaller players include Initial Catering Services, the catering division of the Rentokil Initial Group; Castle View, Halliday Catering, Charlton House, Baxter Storey, Catering Alliance, Harrison Catering Services (mainly active in education catering) and Redcliffe Catering. Business and Industry/Workplace Foodservices The U.K.s business and industry/workplace foodservice sector includes trolley services as well as areas where full meals are sold such as self-run or contracted canteens, National Government canteens, and off-shore catering. The sector has decreased in size in recent years due to shrinking demand and tighter subsidies for employee meals. Catering operators are facing increased challenges in expanding their returning clients; major companies are working towards identifying innovative ways to retain clientele such as operating a variety of branded outlets. Compass, one of the U.K.s larger players, operates branded outlets such as Caf Ritazza and Upper Crust, in most sectors in which they do business. Another trend in workplace catering is the preparation of single serving meals for employees to collect on their way home to be heated up or cooked later, catering to the increasingly busy lifestyles of British residents. Education Schools in the U.K. receive grants from the government to partly cover catering services. This includes all food and drinks served in schools at all levels from nurseries to universities. In the last couple of years, guidelines have been changed so that the meals served are healthy and nutritional. The leading contract school caterers are Compass's Scolarest Division, Initial Catering Services and Sodexho. Healthcare Healthcare centres in the U.K. are, by law, obliged to hire the catering company that submits the lowest bid. Meals in the health care sector include those served to patients, staff and visitors of hospitals, nursing homes and care homes. As with the educational sector, nutritional needs are under scrutiny in this area. Commercial caterers have come a long way in hospital catering due to larger, more viable contract deals, though less so in private healthcare. Similar to other sectors within contract catering, branded outlets are becoming more present, particularly for staff and visitor catering facilities, which are starting to resemble mini shopping malls, with a selection of food and other retail services available. Vending is also used, mainly to cater to night staff when kitchens are closed. Another interesting dimension of the healthcare sector is Meals on Wheels this concept entails delivering and serving lukewarm food in the middle of the afternoon to pensioners. With the boom in seniors residences this has proved to be an interesting growth area, though prospects are now less certain as a result of the U.K.s volatile financial sector, as the elderly may have less disposable income to afford nursing homes. Meals served to the elderly living in their own homes have, consequently, proven to be popular alternatives. The service has been revitalised with the introduction of regeneration vans. Under this system, the food can be cooked or reheated while the van is on the road, so the food is delivered piping hot, which is said to also improve nutritional value. The over 65 age group enjoy the less cosmopolitan food offered, such as sliced roasted meat, and steak and kidney pie.
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The Defence Segment The vast majority of the defence catering market is still managed by the Ministry of Defence catering group, which is part of its defence logistics organization. Like much of contract catering, defence contracts no longer solely focus on food and commonly encompass areas such as waste management, bakery productions, cleaning and laundry management. Despite being a relatively mature market, interest in this sector is high, as the Ministry of Defence decided to overhaul its internal defence infrastructure. The idea is to end up with a smaller number of larger contracts. Defence caterers include mainly large players, such as Sodexho (Defence Services), Compass Group (ESS Defence), and Aramark (combined Services Division). Prisons Catering for prisoners has a number of attractive features. Demand is predictable and regular, and the quality does not have to be higher than adequate. However, the sector is not one in which governments wish to spend large amounts of money. Prison farms and gardens supply varying amounts of food, especially vegetables, pork, bacon, eggs, and milk. The main purchases are dried or tinned foods. Airline Catering The U.K.s in-flight catering has benefited from the importance of Londons Heathrow airport; nonetheless, the trend towards no-frills airlines has encouraged airlines to cut down on free hot meals in the last decade, offering instead, discretionary snacks or sandwiches available for an extra charge. The market leader for in-flight catering in the U.K. is Alpha Flight Services, part of the Alpha Retail Group, and has locations in airports across the country. Gate Gourmet is another strong catering company, currently supplying in-flight meals for British Airways. Meanwhile, LSD Sky Chefs, part of Lufthansa, is another internationally-known caterer, currently supplying British airlines.
Concession Catering
Roadside In the last decade, roadside catering has grown through petrol stations in the form of store foodservice solutions such as cafs, coffee machines, hot food facilities and co-branded outlets with fast food operators. This particular market is split by three main companies: Moto, Welcome Break and RoadChef. Brands operated at Motos include some of Compass' own brands such as Harry Ramsdens, Upper Crust, Caff Ritazza, as well as Fresh Express, Marks & Spencers Simply Food, (a convenience store concept offering hot and cold 'to go' sandwiches and snacks), as well as franchised brand Burger King. Welcome Break operates main street brands such as Starbucks, KFC and Burger King as well as the companys own brands, Red Hen, and Coffee Primo, and a convenience store format. The company also has hotels at motorway service stations including Days Inn and its own chain Welcome Break; these locations have a self-service restaurant and a retail shop, most featuring a Costa Coffee and a Wimpy hamburger restaurant. Airport Outlets Airports have seen numerous multi-brand food courts open up in the last decade. This channel has helped big contract caterers, with their portfolio of brands, to gain a foothold. Also part of the Airport foodservice sector are full-service restaurants, with the likes of Chez Gerard, TGI Friday's, Garfunkels, Giraffe, Est Est Est and Pizza Express, which are all either available or opening in airport sites. Other players are coffee shops, with representation from leading players such as Caff Nero, Starbucks and Costa Coffee in most major airports. Select Service Partner (SSP), is the major supplier of airport catering in the U.K., and is present at most major airports in the country, operating a selection of franchised units and proprietary foodservice concepts. The Restaurant Group is another foodservice player at U.K. airports, operating franchised and owned outlets at some airports across the U.K. It is noteworthy to mention that airport dining experienced high growth since security levels increased in the U.K. Travelers have a meal at the airport and buy drink products and snacks after crossing security in order to take the items on the plane with them.
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Rail SSP U.K. Rail is the countrys major provider of railway catering. Burger King, Upper Crust, Caffe Ritazza, Threshers, Millies Cookies and Whistlestop are some of the familiar names that make up the company's portfolio of over 20 brands. As part of SSP's exclusive franchise arrangement with Marks & Spencer, it operates Simply Food stores in stations across the U.K. Ferries Eurotunnel and Eurostar have negatively affected ferry foodservice operations between the U.K. and mainland Europe, due to their higher convenience and efficiency in terms of links and length of trips. Major ferry operators provide a wide variety of catering facilities such as bars, coffee shops, restaurants, fast food, self service cafeterias and kids food/leisure services. The leading providers of ferry services between the U.K. and France are P&O Ferries, SeaFrance, Brittany Ferries, Hoverspeed Limited, Stena Line, Norfolkline, Fjord Line, DFDS Seaways and Condor Ferries. Vending One of the leading vending companies in the U.K. is Compass Selecta, with an important presence in the subway system with both beverage and snack machines. Another important player is Coffee Point Group the company provides clients an extensive range of vending machines including snack and food machines as well as beverage and coffee machines.
Exporter
Retail (18%)
Foodservice Operator
Source: USDA, HRI Food Service Annual Report United Kingdom, August 2010
According to the data provided in Chart 3, over half of all food and drink sold to foodservice operators is through delivered wholesale. While larger operators will purchase from wholesalers, smaller outlets generally buy from either cash and carries or retail stores. Due to the large number of companies operating within the foodservice sector, intermediaries skilled in fulfilling small orders efficiently, play a pivotal role in the distribution of products.
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The foodservice sector cannot be looked at as a single market. The role of each channel varies from sector to sector. Wholesalers, for example, distribute a lot more frozen foods than ambient products and the retail sector has the most chilled short-life products. Meanwhile, cash and carries mostly supply chilled long-life products.
Advantages and Challenges to Canadian Products in the British Hotel, Restaurants and Institutions Sector
Advantages According to the USDA, there are a relatively small number of specialist foodservice importers, capable and interested in importing from the U.S. this also applies to Canada. Canada has a good brand image in the U.K. Challenges With the exchange rate still being comparatively low against the dollar of two years ago price competitiveness will be fierce.
There are trict E.U. import regulations and labelling/ ingredient requirements. U.K. importers dont pay duty on E.U. origin goods. The importers of Canadian origin products generally pay 0-25 percent import duty, depending on the product.
The country is English-speaking and is therefore a natural gateway into the rest of Europe for Canadian exporters.
CONCLUSION
Food consumption in the U.K. is being shaped by a number of factors. Changing demographics have influenced tastes, with a whole new ethnic food sector emerging around the large numbers of immigrants from Central and Eastern Europe. More significantly, the uncertain prognosis for the U.K.s economy is causing value for money to remain at the forefront of consumers minds. Foodservice will continue to face tough competition from retailers, which have strongly promoted a number of deals that are clearly presented as an alternative to eating out. Ready meals are set to grow as a result of these meal deals offered by retailers. The U.K.s fast food sector continues to be the most challenged within the foodservice industry as a result of growing concerns over obesity rates in the U.K., especially among children. Across chains, but most visibly in the burger segment, companies are diversifying their menus to offer healthier and more upscale products. Pubs are expected to suffer as new regulations to avoid binge drinking come into effect. Meanwhile, in the catering sector, companies are diversifying their offering and providing customers with healthier and more convenient, grab n' go meals. Trends toward standardization through branding and the development of chains have emerged in the U.K.s catering sector. Growth prospects are mostly expected to be seen in the lower- to middle-market sectors, as well as in niche outlets such as coffee and juice bars. The home delivery and take-away service sector is also expected to remain the industrys best performing sector in growth terms. The U.K. is one of the most sophisticated markets in the world. Canadian products face fierce competition in the British market, with European companies incurring relatively low transportation costs, fast delivery times, and duty-free access. Despite the disadvantages faced by Canadian suppliers and manufacturers with regards to market access, there are several opportunities to pursue in this competitive and challenging environment. Working through importers or contracted distributors is the most common approach, and may be the best option for Canadian exporters to get acquainted with the British marketplace. It is, however, essential that Canadian suppliers and manufacturers do a great deal of research and prepare themselves prior to entering the British market. Overall, the British foodservice sector is very large and diversified. The most successful strategy will be to keep up with ongoing trends in the industry, and for manufacturers and suppliers to match their network strategies with the evolving future requirements of the foodservice sector in the U.K.
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BIBLIOGRAPHY
Datamonitor, Country Overview United Kingdom, July 2010 Economist, The. United Kingdom, October 2010, (ViewsWire Euromonitor, 100% Home Delivery United Kingdom, August 2010 Euromonitor, Cafes and Bars United Kingdom, August 2010 Euromonitor, Consumer Foodservices, August 2010 Euromonitor, Consumer Foodservice by Location, August 2010 Euromonitor, Consumer Foodservice United Kingdom, August 2010 Euromonitor, Fast Food United Kingdom, August 2010 Euromonitor, Full Service Restaurants United Kingdom, August 2010 Euromonitor, Self-Service Cafeterias United Kingdom, August 2010 Euromonitor, Street Stalls and Kiosks United Kingdom, August 2010 Planet Retail, HoReCa Market United Kingdom, July 2010 United States Department of Agriculture (USDA), HRI Food Service Annual Report United Kingdom, August 2010
4. 3663 First for Foodservice Buckingham Court, Kingsmead Business Park London Road, High Wycombe, Bucks, HP11 1JU Tel: +44 (0) 870 3663 000 Website: www.3663.co.uk 7. Whitbread Group plc Whitbread Court Houghton Hall Business Park Porz Avenue, Dunstable, LU5 5XE Tel: +44 (0) 1582 424200 Website: www.whitbread.co.uk
5. Mitchells & Butlers plc 27 Fleet Street Birmingham, B3 1JP Tel: +44 (0)870 609 3000 Fax: +44 (0)121 233 2246 Website: www.mbplc.com
6. Sodexho UK Ltd Capital House, 2nd Floor 25 Chapel Street London, NW1 5DH Tel:+ 44 (0) 20 7535 7400 Fax:+ 44 (0) 20 7535 7401 Website: www.sodexho.co.uk
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The Government of Canada has prepared this report based on primary and secondary sources of information. Although every effort has been made to ensure that the information is accurate, Agriculture and Agri-Food Canada assumes no liability for any actions taken based on the information contained herein.
The United Kingdom: A Diverse Foodservice Sector Her Majesty the Queen in Right of Canada, 2011 ISSN 1920-6593 Market Analysis Report AAFC No. 11459E Photo Credits All Photographs reproduced in this publication are used by permission of the rights holders. All images, unless otherwise noted, are copyright Her Majesty the Queen in Right of Canada. For additional copies of this publication or to request an alternate format, please contact: Agriculture and Agri-Food Canada 1341 Baseline Road, Tower 5, 4th floor Ottawa, ON Canada K1A 0C5 E-mail: infoservice@agr.gc.ca Aussi disponible en franais sous le titre : Le Royaume-Uni : Un secteur diversifi des services alimentaires