The state of eating-out

Peter Martin, Peach Factory

Reaction to recession

People aren’t staying at home Search for affordable luxuries Declining trends

‘Experience seeking’ ‘Green / ethical consumerism’

Growing trends ‘Demand for simplicity’ ‘Discretionary thrift’ ‘Mercurial consumption’

Source: ‘The post-recession consumer’, P Flatters & M Willmott, Harvard Business Review, July-August 2009

Record year at the movies

£1bn sales in UK in 2009

Top pub and restaurant chains ahead too

-6.00%

-4.00%

-2.00%

0.00%

2.00%

4.00%

6.00%

8.00%

May Jun Jul AugSep OctNovDec JanFeb Mar

LFLTotal sales

Six months Easter to Xmas in positive territory

Data from Coffer Peach Business Tracker

People still eating out

3

1

4

5

10

6

4

3

10

7

21

20

20

21

21

23

24

23

32

26

22

24

39

40

33

39

25

24

22

24

22

22

29

30

17

25

24

24

13

11

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Self service

Fine dining

Pub/bar meals

Fast food restaurant

Bakery/sandwich shop

Coffee shop

Casual dining

Pub restaurant

Daily 2-6 x a week 2-4 x a month Every 2-6 months Rarely (once/twice a year) Never

Source: HARRIS INTERACTIVE / PEACH FACTORY - EATING OUT FIELD SURVEY: 12th August - 20th August 2009

…compared to 2008

3

1

4

5

9

7

4

4

9

9

18

22

19

21

21

23

21

25

33

23

23

23

38

36

34

34

25

23

21

22

21

23

31

31

19

27

26

25

15

14

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Self service

Fine dining

Pub/bar meals

Fast food restaurant

Bakery/sandwich shop

Coffee shop

Casual dining

Pub restaurant

Daily 2-6 x a week 2-4 x a month Every 2-6 months Rarely (once/twice a year) Never

Source: Eating-out and the Consumer 2008, Peach Factory/Harris Interactive (survey February 2008)

U25s driving eating-out (% eating out at least monthly)

2925

31

42

47

2725

22 23

3539

25

20 21 21 20

30

232428

21

8

16

31

0

10

20

30

40

50

60

70

80

90

100

Casual dining Pub restaurant Pub/bar meals Fast food restaurant Bakery/sandwich shop Coffee shop

16-24 25-34 35-44 45-54 over 55

Source: HARRIS INTERACTIVE / PEACH FACTORY - EATING OUT FIELD SURVEY: 12th August - 20th August 2009

A brand literate nationIncrease in recognition across the board in past 18 months

Brand awarenessWhich of the following pub and restaurant brands have you heard of?

Over 90% know:McDonald’s; Pizza Hut; Burger King; KFC; Starbucks; Little Chef; Wetherspoons; Wimpy; Subway

Over 80% heard of:Beefeater; Pizza Express; Costa; Harvester; Over 70% know:Brewers Fayre; TGI Fridays; Frankie & Benny’s; Pret a Manger; Caffe Nero; Yates’s

Over 60% heard of:Slug & Lettuce; Nandos; Café Rouge; Garfunkels

Over 50% recognise:Bella Italia; Caffe Uno; Toby

Source: HARRIS INTERACTIVE / PEACH FACTORY - EATING OUT FIELD SURVEY: 12th August - 20th August 2009

Biggest visibility winners• La Tasca - up 19% points• Café Rouge - up 16%• Bella Italia - up 16%• Caffe Nero - up 15%• Carluccio’s - up 15%• Wagamama - up 14%• Toby - up 14%• YO! Sushi - up 12%• Pret - up 11%• Nandos - up 11%

Source: HARRIS INTERACTIVE / PEACH FACTORY - EATING OUT FIELD SURVEY: 12th August - 20th August 2009

People are using brands

1. McDonald’s 40%2. KFC 27%3. Wetherspoon 26%4. Subway 26%5. Pizza Hut 21%6. Burger King 20%7. Starbucks 18%8. Costa 17%9. Pizza Express 16%10. Harvester 16%

Source: HARRIS INTERACTIVE / PEACH FACTORY - EATING OUT FIELD SURVEY: 12th August - 20th August 2009

% eating at in past six months

People are using brands

11. Brewers Fayre 14%12. Nando’s 13% 13. Frankie & Benny’s 13%14. Beefeater 10%15. Pret 9%16. Caffe Nero 9%17. Café Rouge 9%18. Toby 8%19. Wagamama 8%20. Little Chef 7%Source: HARRIS INTERACTIVE / PEACH FACTORY - EATING OUT FIELD SURVEY: 12th August - 20th August 2009

% eating at in past six months

Biggest winners

• Subway +6% pts• Costa +6% • Pizza Express +6%• KFC +5%• Nandos +5%• Wetherspoon +4%• Café Rouge +4%• McDonalds +3%• Wagamama +3%

Source: HARRIS INTERACTIVE / PEACH FACTORY - EATING OUT FIELD SURVEY: 12th August - 20th August 2009

Increase in those visiting in past six months

Value and promotion work

Brands in growthannouncements only in past few weeks

• M&B to focus on six core brands

• Punch rolling out new concepts

• Nando’s plans for 20plus openings this year,

• Clapham House plans to triple number of GBKs

• Tampopo plans to expand at a rate of three or four sites a year

• Busaba Eathai plans four more sites,

• Giraffe launches Guerilla Burgers a new burger restaurant

• Living Ventures launches Red Door Neighbourhood Bar & Kitchen.

• David Bruce’s Country Food & Dining secures fourth site

But there’s competition

Operators have to be smart

How good was the experience?A more mixed picture from a more discerning consumer(% rating experience good or excellent)

Over 75% positive rating:Carluccio’s, Nando’s, Prezzo, Wagamama

Over 70% positive rating:Pizza Express; Beefeater; Harvester; La Tasca

Over 65% positive rating:Café Rouge; Toby; Chef & Brewer; GBK; Table Table; Bella Italia; Pizza Hut; Subway; TGI Fridays; Pret a Manger

Source: HARRIS INTERACTIVE / PEACH FACTORY - EATING OUT FIELD SURVEY: 12th August - 20th August 2009

But not all good newsConsumers much more critical - by and large a dip in experience ratings

Big risers - giving a better experienceCarluccio’s, Nando’s

Big losers - giving a worse experience….some casual dining brands who might be resting on their laurels

Innovation, excitement and giving people a reason to go out…winning through

Source: HARRIS INTERACTIVE / PEACH FACTORY - EATING OUT FIELD SURVEY: 12th August - 20th August 2009

A few words about pubs….

• Only 25% of adults go to their local for a drink at least twice a month; just 8% weekly

• Over 60% drink at home at least twice a month; 38% weekly

• 65% say they “like traditional pubs”• But not the centre of social lives • Prefer pubs with good food and wine

Source: Eating-out and the Consumer 2008, Peach Factory/Harris Interactive (survey February 2008)

What bosses are going to do about it

Market imperatives

Biggest challenges

1. Consumer confidence 2. Economy3. Employee relations4. Access to funding5. Changing customer habits

But are generally optimistic

Issues for consumers

1. Quality of experience2. Service3. Price 4. Consistency

Becoming more important

1. Customer service2. Online marketing3. Staff training4. Strong brand identity5. Menu development6. Customer feedback / research

Technological solutions: Voice recognition to improve drive-thru, carry-out and delivery orders - staying on top of

costs

Where need to improve

1. Online activity2. Consumer research3. Marketing4. Property / site acquisition5. Staff training and development

Where invest

1. Service levels2. Food quality3. Marketing and promotions4. Menu development

Investing in service culture

The new wallet

“It is not the strongest of the species that survives, not the most intelligent, but the one most responsive to change.”

Jim Sullivan quoting Darwin