Is Foodservice Delivery Pricing Out the New Consumer?

This week marks the fifth week of lockdown in the UK. This period has sent shockwaves across businesses and industries throughout the country. However, it’s fair to say that the eating out market has experienced one of the biggest shakes.

As site doors were shut on 23 March with no finite reopening date, a potential lifeline remained for foodservice in the form of delivery.

Since this date, HIM/MCA Insight Channel Pulse has been busy tracking the weekly changes in consumer behaviour and attitudes within and towards the Foodservice Delivery channel, helping build a picture of the to these changes.

The share of meal occasions that foodservice delivery now covers is 3.44%, this comes after a moderate peak last week of 3.52% and a starting point of around 3.38% in the first week of lockdown. The dinner daypart, somewhat unsurprisingly, heavily over-indexes.

These figures are not massive, nor their weekly changes momentous. One might have imagined higher growth rates, as delivery stepped in and took a share of the UK food and drink market that once belonged out-of-home channels. So why hasn’t that happened?

Firstly, not all operators have been able to stay open. Our weekly Operator Data Index figures suggest that, for multi-site operators, currently less than one brand is open for every two brands that are closed. You obviously cannot deliver from a closed kitchen.

Therefore, you might expect ‘lack of choice’ to be the main barrier to usage for consumers, but fewer than 1 in 10 non-users agreed. ‘Too unhealthy’ scored similarly, with 8% agreement, whilst ‘concerned about food safety’ was considered more important, at 16%. Meanwhile, with a quarter of the votes, ‘too expensive’ comfortably took the top spot.

Our latest Menu Tracker figures show that, within out-of-home foodservice, Autumn/Winter 2019 menu price inflation was 1.9%, 0.3pp ahead of UK CPI inflation for the same period. Combining this with findings from our 2019/20 Foodservice Delivery Report, which showed that the channel charges a premium of around 6% versus out-of-home, the answer becomes more clear.

But the argument remains that, even with a premium, with no out-of-home market surely there’s spare spend that can be transferred to delivery? Sadly, a quick glance at UK consumer confidence levels reveals that we are not dealing with the same consumer compared to even just a month ago. GFK’s Consumer Confidence Index plummeted from -7 to -34 in late March 2020, the biggest fall in 45 years.

There’s a new consumer. And they’re going to be much more price sensitive.

With this in mind, the fate of a growth surge for delivered foodservice rests on two main things should lockdown persist:

One – A delivery-only reopening of many currently closed quick-service restaurants. These restaurants, such as McDonald’s, have a strong value affiliation and had an increasing delivery presence (prior to lockdown).

Or two – Currently operating brands functionalise their offer to become ‘everyday’ solutions as opposed to ‘treats’, leading this new offer with value-led messages (on top of existing food safety messages which are an imperative).
The latter will take some work, but if operators are open it’s certainly worth them exploring – as we can’t imagine this new consumer will be going anywhere anytime soon.

 

Insight reports featured in this article

UK Recovery Report 2020

Business implications for grocery and hospitality market stakeholders

 

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