In this two part series, and ahead of the publication of a fuller report covering food-to-go opportunities across Europe, we look at the state of play for both food-to-go specialists and food retailers in the development of their food-to-go strategies. In this first part, we look at how food-to-go operators are evolving their propositions and what moves might be next.
1. Model simplification: The outlook will improve, but shifts in operating models will continue
We’re feeling many different financial and trading pressures right now, not least with food & fuel inflation, a shortage of skilled labour and the continuing impact of the Russian invasion into Ukraine. Our starting point on this is that things seldom look as bleak as they do at the start of the year, so we're anticipating improvements across many of these areas, not least in reduced levels of food inflation, as the year progresses.
But there will be a legacy of these shifts on operating models, which in some cases is still working its way through. For food-to-go operators, getting the right balance between in-store and central production is an important dynamic, and one that has been reviewed by many leading London food-to-go operators for example over recent months. Alongside this, more operators have been switching the ordering process to be via customer facing digital screens, rather than face to face over the counter. Given continuing labour pressures, we'd expect further development. A watch out is that a shift to digital ordering can erode the differentiation, but it need not, and in fact can even enhance the overall experience - admittedly more easily when digital ordering is factored into store design from the start rather than retrofitted. We're talking here primarily around digital ordering kiosks rather than phone based ordering, but that too, based on what we've seen in the US, has more growth potential across Europe.
2. Locational diversification: Redefining where the best opportunities lie
The broader theme of locational diversification is an important one, not least for operators who have traditionally focused their models on a lunchtime working population, which as a whole continues to spend more time working from home compared with pre covid.
So what does this mean for location strategies? A number of principles come through for us;
Better targeting leisure traffic. A particularly significant concern in London, but also in other major cities, the ability to target seven day traffic rather than a 3.5 day window each week is driving the attractiveness of different types of locations.
Becoming a more integral part of leisure missions. There are several aspects to this, one is around locating closer to customers’ homes, in satellite / commuter towns and cities, rather than their workplaces. Another important element of this lies within expanding within leisure-oriented attractions and destinations, where, at times, the quality of the food & drink proposition might not have previously been the top priority.
Hitting the road. We’ve been talking for a while about the upcoming roadside revolution. There's still much variability - and hence opportunity - here. There are already some fantastic roadside examples across Europe to learn from. What's more, the sector is now attracting strong new entrants, such as pub/ restaurant operator Loungers in the UK, which will open its new roadside concept Brightside in 2023.
Heading home with customers. Of course delivery is one aspect of this, but there's an intriguing opportunity around locating within residential developments. Foodhalls such as MMyMercato Wood Wharf in London and the Gotham Food Hall West in New York, are already targeting this. It can provide a win-win outcome, for the landlord in delivering additional reasons to buy/ rent and for the food business in providing a built-in, ready made customer base. As this evolves, we’d expect growing opportunities for food-to-go specialists with the right brand fit.
3. Developing loyalty & strengthening value: join our club
There’s a question to be answered over what best in class loyalty looks like in food-to-go , and an opportunity to define it – our view is that there isn’t necessarily a single benchmark to follow right now. We do however believe that the US that leads Europe in this space right now, with loyalty schemes embodying membership style and community benefits starting to impact. Foxtrot, albeit with an offer that extends beyond food-to-go, is one of those setting the new standard. In the UK, Pret's development of Pret Perks is also one to watch. In short, there’s a real opportunity to create membership and community benefits.
And of course this needs to done alongside delivering value. Clearly, offering lower prices as a membership benefit, is one way to combine the two. Expect extra value perks to become a more integral component of loyalty this year.
4. Menu optimisation & balance: offering something for everyone while strongly focusing on the biggest sellers
Simple to say, harder to do, but this is a principle running through the thinking of most foodservice operators across Europe right now. Food prep time and waste are key considerations, and there’s a focus on keeping ranges tight to drive efficiencies. But possibly the even more significant point is around menu balance, offering a range of menu items suitable for those with a range of dietary preferences while maintaining broad appeal. Several operators in London, including the likes of Kaleidoscope, Coco di Mama and Farmer J, offer approaches to learn from in this area, not overtly promoting plant-based/ vegetarian lines, but featuring them prominently as part of a broader menu.
5. Towards more sustainable food-to-go models
Covid created a set of requirements for food-to-go operators that, if anything, had a negative rather than positive affect on the environmental impact of operations, with reusable cups and bowls taking a back seat for many and increased use of packaging.
But 2023 promises to be a key year. New legislation in France severely restricts the use of single use packaging for on-site dining, prompting the likes of McDonald’s to switch to reusable packaging across its 1,500 French restaurants.
Meanwhile in Germany, Burger King is the latest business to sign up to the impressive RECUP scheme, focused on providing an infrastructure of reusable bowls and cups that companies can join across German cities. New legislation that's just come into force in Germany gives customers the right to ask for reusable packaging when they visit food-to-go operators.
Across several European markets there’s huge potential here, and an increasing imperative to act. Our advice is to lead now rather than wait and respond to legislation – which feels like it will be a when and not an if across most markets.
Of course, packaging is just one aspect of the sustainability journey, which we see as rising again up the consumer and business agenda as 2023 progresses.
Four key points to ensure your business is fit to trade in 2023:
Know your strengths and how your perceptions of these compares with your customers. Any innovation needs to come off this base to stand a chance of success.
Be more creative in how you deliver value for money. Many consumers will look to cut back more than normal in Q1 2023 – empathising with this goal will be important. For operators, creative use of loyalty mechanics can be a key route through which to deliver this. Our key guidance would be to make this customer led though rather than operator led – or at least run sense checks of consumer relevance across any proposed initiative.
Be bolder in your menus, around guidance and recommendations. Whether a food-to-go operator or manufacturer, you’ve more knowledge around your menu items than most of your end consumers could ever dream of. In this environment, there will be less willingness to risk buying unknown items – your guidance and advice can therefore play an important role in bridging this gap. Equally, this applies to being bold around cutting back on slower selling lines – less can be more, and expansive menus run the risk of diluting core strengths. In the UK, UK Hospitality recently reported that one in three foodservice businesses were considering cutting back their menus.
Review and update your sustainability journey. Easier said than done, but to lead rather than follow will bring greater benefit, plus initiatives around this are a great way through which to better engage consumers, which can support the development of loyalty mechanics.
Like what you've read? Want to learn more? Sign up here to do exactly that at our next RATIONAL webinar on Tuesday 31 January, where I'll be joined by RATIONAL's International Retail Director Max Schwaller and Scotmid's Head of Food-to-go Danny Scobie. More info on what we'll cover, and the fuller webinar series, can be found here.