Return to 2006 levels for foodservice market

The UK foodservice sector is being tipped for a return to the sort of levels last seen in 2006, two years before the global credit crisis was blamed for putting the brakes on market growth.

While 2013 saw the sector nominally grow by just under 1% to £44.9bn, this year it was likely to return to 2006 levels, showing nominal growth of 1.8%, according to industry research firm Horizons.

Taking inflation into account, the ‘real’ growth is almost 4%, revealed Horizon’s managing director, Peter Backman, at the company’s recent Annual Conference in London.

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“It’s been a long time since I have been confident enough to predict real growth in the foodservice market,” he said.
“In the recent past the margin squeeze that operators have experienced has eased and for the last couple of months we have been moving into positive territory — this is good news for businesses in the sector.”

With clear winners – namely pizza delivery operators, pub restaurants, managed branded pubs, sandwich shops and coffee shops, all of which had seen over 10% growth over the past 12 months — Backman cautioned operators not to take recovery for granted and to continue to invest in their business.

Industry panellists at the briefing were generally optimistic about trading. But several expressed concern that as the UK’s productivity improved, real wages would rise along with it, making it harder for the hospitality industry to retain and recruit good staff.

The recovery was also criticised for being consumer-led rather than led by business investment. Growing employment means that the UK’s productivity has gone down, rather than up.

ASK Italian managing director, Steve Holmes, said that while ASK was investing millions of pounds into the business — with one refurbishment completed every five days — retaining and recruiting staff was still a challenge. Margin squeeze, he said, was still an issue because they had to pay more for good staff, as well as coping with rising costs of ingredients such as wheat and seafood.

Mitchells & Butlers CEO Alistair Darby agreed that staffing was a key issue, terming it an ‘overheating problem’ as employment grows in other sectors.

“The challenge is trying to recruit good people. We have to change our mindset on training, working hours and salaries in this sector,” he said.

Another panellist, Stefano Fraquelli, CEO of Metropolitan Restaurants, a boutique chain of central London Italian restaurants, pointed out that now, more than ever, it was important to focus on what you do well, even if it means placing limits on growth.

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