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As Foodservice Recovers, What Can Food Retail Do?

1/31/2023
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Global foodservice transactions continued to recover in 2022 from the strong decline of 2020. This is happening despite high levels of persistent inflation, a decline in consumer and business confidence, and the implementation of hybrid work-from-home policies, which reduce the number of occasions for having lunch out of home and eating out after the office but increase the opportunities for takeaway and home delivery options.

As Foodservice Recovers, What Can Food Retail Do Chart 1.svgHaving enjoyed somewhat of a break from competition with foodservice, post-pandemic packaged food companies must again adapt to a new landscape, providing experiences and convenience in order to compete.

Why is the foodservice channel recovering?

A fundamental reason for the recovery in foodservice is that the restrictions caused by the pandemic are over in many markets. Closures, reduced hours, limited sitting space – all are measures that have been significantly discontinued, and consequently consumers have been able to return.

However, that is not the only reason. There are two factors in consumer preferences that are influencing the recovery as well:

1. The increasing desire to experience and enjoy life favours visits to restaurants

According to Euromonitor’s Voice of the Consumer: Lifestyles Survey, consumers are increasingly planning to visit restaurants in the next 12 months. One related factor is that consumers more and more are preferring to spend their money on experiences, rather than things. This preference is stronger in millennials. On the other hand, consumers increasingly declare that they want to enjoy life and don’t worry about planning for the future. This preference had a strong increase in 2022, and it is stronger in Generation Z and millennials.As Foodservice Recovers, What Can Food Retail Do Chart 2.svg 2. Consumers increasingly order takeaway or home delivery food for convenience

According to Euromonitor International’s Voice of the Consumer: Lifestyles Survey, every year, more consumers have ordered food at least weekly, both for takeaway (or pick-up of ready-made food to eat at home) and for home delivery. This behaviour is more likely in millennials than in other generations.As Foodservice Recovers, What Can Food Retail Do Chart 3.svgTo a certain extent, this is a consequence of more people spending time at home, hybrid working policies, and inflation. But according to the same survey, in 2022 when consumers were asked about the reasons preventing them from cooking at home more frequently, 29% of millennials answered that they do not have time to cook, 24% of Generation Z stated that they do not cook very well, and 25% of millennials considered that ordering food for delivery is more convenient than cooking. This explains why younger generations are more likely to order food for takeaway or home delivery.

29% of millennials do not have time to cook

Source: Euromonitor Voice of the Consumer: Lifestyles Survey fielded January-February, 2019 (n=40,464); 2020 (n=41,231); 2021 (n=40,732); 2022 (n=39,832)

When buying food for takeaway or delivery, online channels, especially smartphones, continue to increase at the expense of in-store/in-person alternatives. According to Euromonitor International’s Voice of the Consumer: Lifestyles Survey, while in 2016 only 20% of consumers used a smartphone for that purpose, in 2022 that percentage reached 41%. This is sustained by the growth of delivery apps and the plethora of food alternatives they currently offer.

Four opportunities for packaged food companies as foodservice recovers

In this new scenario, the first opportunity for packaged food companies is to consider foodservice channels as a potential client, rather than as a competitor. Some companies already have foodservice channels as an important client (for example, frozen processed potatoes companies). However, for others it implies a new venture.

Second, packaged food companies may try to benefit from the food-for-home-delivery business, either as a supplier or even as a player, considering that ghost kitchens and delivery apps have pushed down entry barriers. For example, Heinz created virtual brand The Burger House at the end of 2021 in Spain, in team with foodservice company Avanza Food, to sell burgers and other products to be consumed at home.

Third, packaged food companies can try to provide convenience to compete with delivery apps. For example, frozen processed products can take advantage of the increased ownership of freezers that occurred during the pandemic. In particular, frozen processed meat showed positive growth rates in sales volume in each of the last 10 years. Prepared salads and meal kits show the same continuous growth in sales volume. The latter even address the issue of consumers not knowing how to cook.

Fourth, packaged food companies can partner with cooking appliances brands to make the process of cooking a more convenient and enjoyable experience. For example, a main selling point for multi-cookers is that everybody can be a gourmet chef. With these appliances and the help of online recipes, consumers can indeed make restaurant-style meals at home. For instance, Thermomix (Vorwerk Group) announced at the end of 2021 that there were more than 78,000 guided cooking-enabled recipes for the Thermomix TM6.

Read our briefing Inflation Surge: Packaged and Fresh Food for more analysis of opportunities in the food industry.

 

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