By Simon King
The food-to-go market in the UK is showing exponential growth, driven by the vibrant convenience retail sector.
The UK food-to-go market is forecast to be worth £23.4 billon (A$42.3bn), up from £18.5bn (A$33.5bn) in 2019, growing by 26.4%, according to new data from IGD Research. The data highlights that the food-to-go channel is set to experience double the growth of the wider UK food and grocery retail market – 12.5% – over the next five years.
In the UK, the food-to-go sector can be segmented into a number of different areas including specialist food-to-go retailers, convenience stores, forecourts, quick service restaurants (QSRs), coffee shops and supermarkets. In the spirit of competition, the product offering across the retail mix can often be as varied as the outlets themselves.
What the majority of food-to-go outlets have in common, however, is the need to be able to respond both quickly and efficiently to peaks in demand throughout the day, whilst at the same time minimising over-production and any potentially costly end-of-day wastage.
As convenience stores offer an increasingly diverse range of products and services, it is natural that more and more people are rediscovering the true convenience that they provide.
A typical food-to-go offering consists of freshly baked products such as bread rolls, Danish pastries, tray-bakes, pasties, pies and sausage rolls. Many of these products are either frozen or part-baked and simply ‘finished off’ in a small convection oven to provide the allusion and appeal of a fresh baked product.
IGD head of shopper and food-to-go insight Rhian Thomas said: “Food-to-go remains a key growth opportunity for businesses, and one that appears particularly attractive given the structural and growth challenges being faced by UK supermarkets and hypermarkets right now.”
While there continue to be good opportunities for growth in this area, the gap will continue to grow between those businesses who are actively targeting food-to-go growth and those who simply want a presence in the channel. Opportunities remain, however, for those with clearly defined and relevant strategies.
Ms Thomas added: “Convenience and food-to-go are increasingly intertwined, as food-to-go success becomes increasingly critical to the prospects of most convenience stores. Similar principles apply to the forecourt channel, where the added need to encourage dwell time among shoppers will grow in importance as the factors influencing where and how people stop on the road shift.”
“Consumer expectations around convenience and forecourt food-to-go are rising fast, creating an opportunity for businesses to invest and upgrade, or else risk getting left behind. The good news here is that there’s lots of growth to go for, and in many locations, there remains opportunity to do more to meet these evolving shopper needs. Those businesses who focus more on emulating competitors rather than investing in how they can innovate will meet the big challenges.”
Outside of the convenience store sector, food-to-go specialists in the UK include Greggs, Leon, Pret and Subway. IGD research said that sales among food-to-go specialists will increase from £5bn (A$9.1bn) in 2019 to £6.3bn (A$11.5bn) in 2024.
Ms Thomas said: “Food-to-go specialists include a wide selection of different operators, and within this segment we’ve witnessed contrasting fortunes and performance over the past year. What is clear, however, is that significant growth opportunities exist for those with a relevant proposition who target the right locations.
“While menus continue to evolve, with vegan and vegetarian lines gaining more profile on many menus in 2019, the location question is a fascinating one right now, as the combination of high rents and increased competition on high streets encourages a growing number of operators to vary their location strategy.”
Staying on the theme of location, HIM Research and Consulting said that food-to-go out-performs the overall market at sites where there is more footfall and where ranges have been invested in.
Giorgio Rigali, communications manager at HIM Research and Consulting, said: “12% of all the trips to convenience are driven by the food-to-go mission. The largest barrier for shoppers to buy more food-to-go products from convenience stores is a lack of meal deals, according to 27% of shoppers.”
Looking at average transactions, Mr Rigali said that hot food-to-go is usually more expensive for the retailer, £5.61 (A$10.19) vs. £4.73 (A$8.59) for chilled food-to-go.
“There is a definite opportunity in driving a higher spend in food-to-go through the hot offering,” Mr Rigali said.
“Both ideally work hand in hand – in the right locations. Hot food and drink will help drive more breakfast and lunch trade and can be a source of some localised competitive advantage. Cold food is easier operationally and more of a basic expectation.”
A food-to-go offering plays to the strengths of the convenience store operator. Despite having to contend with the online shopping revolution, convenience stores offer in abundance the sense of community and warmth that online retailers can only dream of.
Convenience also equates to speed and instant gratification – the food-to-go sector is a prime example. Convenience stores are there exactly when you need them.
Scottish convenience retailers embrace food-to-go
Last year, Scottish convenience store operators could apply to the Scottish Government Capital Investment Programme, which offered funding to assist the creation of in-store food-to-go facilities.
Under the programme, retailers could apply for up to £7,500 (A$13,581) and any funding offered had to be matched by the retailer.
Dr John Lee, head of policy and public affairs at the Scottish Grocers Federation, said: “We received 95 applications – the standard was very high. Food-to-go, as a category, is becoming increasingly important.”
“It’s responding to customer needs, giving the stores a point of difference and helping them to stay competitive in the face of the challenges from the big supermarkets, the discounters and online. Food-to-go is hard work, but for the stores that are doing it right, it is paying off.”
Dr Lee added: “In Scotland, the convenience store as a traditional grocery store will begin to morph into something where food-to-go could be the biggest part of the business. There was a broad range of applications: some are setting up pretty large deli-style operations in-store, others are just at a starter level, using the kind of coffee machines that also allow you to make porridges and soups.”
Dr Lee said that he was delighted that the funding programme had resonated well with Scottish independent retailers.
“I don’t think that any other trade association has managed to do this for their members – over the past two years we have leveraged in £550,000 (A$995,992) worth of direct investment to our members.”
Foodservice gains traction in the UK
A new report from the Association of Convenience Stores provides a comprehensive view of the UK convenience sector. The Local Shop Report 2019 states that there are 46,388 convenience stores in mainland UK; Wales, where the author of this article lives, has more shops per head than any other part of mainland UK.
Looking at foodservice, the ACS report highlighted seven key categories and gave the percentage of stores in the convenience sector that provide each service:
- 34% – Customer-operated coffee machine
- 24% – In-store bakery
- 23% – Hot food counter or cabinet
- 22% – Food preparation area/kitchen
- 14% – Serve-over coffee machine
- 12% – Microwave for customers
- 10% – Food-to-go concession
Bakery outlets show strongest growth among QSR channels
Bakery outlets have seen the strongest growth in on premise business amongst quick-service restaurant channels in the UK, according to a new report.
The Bakery Trends Tracker Report, compiled by The NPD Group, reveals that sales and visits in the financial year ended April 2019 were up 19% and 18% respectively.
The report concludes that this growth offers a solid platform with which bakery chains and independents can attempt to gain a greater foothold in the food-to-go and delivery markets.
It claims that currently, bakeries only service 3% of total click and collect, but sales are already increasing from this low base.
Peter Linden, insight manager, foodservice UK, at The NPD Group, said: “Many businesses – small and large – are moving away from their traditional bakery offering to a sharper food-to-go focus.”
“This involves putting on good coffee, offering new food choices such as pizza, salads, pasta, hot sandwiches, croissants, pasties and much more, and meeting the demand for click and collect and delivery.”
“Bakeries by their very nature focus on food-to-go and this is where the growth is, with sales in this part of Britain’s total out-of-home market having grown by 8% in the year to April 2019.”
Mr Linden continued: “Bakeries can secure more growth by increasing their share of the food-to-go market from their current level of just 5%, and by bringing their food-to-go appeal to dayparts they don’t normally service, such as dinner.”
He added that although ‘old-school’ family run bakeries still exist in the UK there are also a growing number of ambitious outlets ready to compete with big high street chains.
“We believe competition will heat up,” he said. “Bakery chains are ideally suited to riding some of the big trends in British foodservice and have responded imaginatively to consumer demand for convenience.”
At A Glance:
- In Australia, food on-the-go grew 11.5% in 2019 and is worth $659 million, according to the AACS 2019 State of the Industry report
- It is the second fastest growing category and the third highest by value in Australian convenience
- The take home food category increased by $5 million last year, generating $149 million in total sales for the channel
- Consumers are increasingly looking to healthy, fresh and better-for-you options such as pre-made wraps, sandwiches and salads
- Stores who cater different offers to different dayparts generate sales, ie, bacon and egg rolls for breakfast, pies for lunch increase sales