Simon Stenning's detailed forecasts cover the 18 months from July 2020 to the end of 2021.
Forecaster and analyst Simon Stenning predicts that “the UK foodservice sector will lose £23 bn in the second half of 2020, achieving only 53% of 2019 income levels, and, as a result of coronavirus, 22% of all hospitality outlets will not be open by the end of 2020.”
For the whole of 2021 the forecasts are that the industry will see a £10 bn fall in revenues
, down to only £88 bn, 10% lower than in 2019. The long-term growth forecasts for the industry are that it will recover to 2019 levels by 2025 at the latest
, as the economic impacts linger, but that it will eventually increase to £108bn by 2030
A degree of caution can be seen from various consumer research studies, with a figure quoted by research firm CGA that 21% of UK consumers would eat and drink out less frequently than before
, and insight from research commissioned by leading chef Marcus Wareing showing that 34% of consumers expected to spend less when they returned to restaurants
. These insights imply severe revenue decreases for operators. Consumers will also certainly have high expectations over the standards employed to keep them safe, and the value that they receive from the experience.
„As a result of coronavirus, 22% of all hospitality outlets will not be open by the end of 2020.“
Changing consumption habits
In lockdown, there was an obvious switch from eating out to delivered services, despite some restaurants not opening for a while. This switch to, and increase in, food delivery from restaurants and kitchens
has remained despite restaurants re-opening at the start of July, and is part of a long term trend of changing consumption habits.
It is forecast for the long term that the share of stomach (out of c.90 total meals eaten each month) will change, with grocery losing share to eating out, delivery and an increase in snacking.
Financial modelling shows that despite decreasing headcount, reducing costs and maintaining margins (which will be harder with potential increases in supply chain costs), a restaurant operating on 50% normal sales plunges to a significant loss, and only a rent reduction, rates holiday and drastic salary cuts will enable many restaurants to break even
. The VAT cut (from 20% to 5%) from July was not passed on to consumers in the majority of operations, other than some large-scale branded chains such as Costa Coffee and McDonald’s. Most operators kept pricing the same in order to benefit from the increased margin to help with cash flow.
Decline in consumer spending At the end of 2020, and in 2021
, there will be a significant increase in unemployment
which will drag down consumer discretionary spending
, whether physically reduced, or through exercising more caution. All together, these economic effects will mean that many sites won’t re-open, or will fail within a few months
Fast food best off
The new normality post-lockdown includes an expected reduction in travelling and commuting by public transport and more working from home, together with dramatic falls in in-bound tourism. As a result, certain sectors of the market will fare better, including fast food
, which will steal share from service-led restaurants, due to their ability to provide takeaway, delivery and drive-thru services
, as well as delivering intrinsic value. Forecasts are that fast food will achieve 77% of normal revenues for the rest of 2020
, whereas service-led restaurants will achieve only 48%
With 30+ years’ experience of working in, developing, analysing and commenting on the UK foodservice industry, and previously Director of MCA Insight, Simon Stenning is acknowledged as a leading analyst of the market today. He produced a report on ‘The Future of Foodservice, 2030’ in 2019, and has now produced the forecasts for ‘The Immediate Future’. The 120-page report provides detailed forecasts for each sector, by number of outlets that will be open by the end of the year and the level of turnover to be expected. For more details see: www.simonstenning.com