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Chapter 4 Consumer dynamics

Chapter 4 Consumer dynamics

Much of the recent growth within the premium in-home dining market has come from changing consumer behaviour and lifestyles, influenced to a large extent by the economic downturn. With more people cutting down on their spending, this has created opportunities for manufacturers and retailers of premium food and drinks for in-home dining, which usually works out as more affordable than visiting a restaurant.

When discussing the potential consumer base for the premium in-home dining market, it is worth considering how widespread eating out remains in many parts of the world. This is because these people represent the main target audience for premium dishes and meals, owing to their familiarity with restaurant quality foods. Around 1 in 2 of every meal eaten in the US occurs outside the home at present, compared with 1 in 3 in the UK, 1 in 6 in Spain and 1 in 7 in France.

Another effect of falling expenditure levels amongst much of the worlds population has been the increasing appeal of the home as a place to eat, entertain and socialise. This has even led to the emergence of terms such as the staycation namely, forsaking foreign holidays to stay at home in order to save money. As a result, people are spending more time and money in the home, thereby broadening the potential consumer base for in-home dining still further.

Europe Although the UK has traditionally had one of the largest foodservice markets in the EU region, changing consumer lifestyles during the recession has led to a fall in the number of people eating out regularly. Unfortunately for foodservice operators, eating out is usually one of the first casualties of a drop in consumer spending for example, a survey carried out by PricewaterhouseCoopers in 2009 found that 11% of respondents cited dining out as the first choice when asked what they would give up to lower spending levels. This figure rose to 14% for ordering takeaway meals.

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Chapter 4 Consumer dynamics

At present, UK consumers eat out on average twice a month, with over 70% of the countrys population visiting restaurants at least once every quarter. Eating out is most evident amongst the 16-to-24-years-old age group (owing to their lack of family commitments), although expenditure levels per visit are higher for their older counterparts. In geographical terms, the frequency of eating out is highest in London, with pubs and casual dining outlets currently increasing their share of the market at the expense of more formal establishments. The most important attributes when choosing where to eat out amongst UK residents are the quality of food, the type of food served, service and value for money.

However, research from the media agency MPG has indicated that 64% of UK families are eating out less compared with before the economic downturn. In a survey of 500 families, MPG found that almost two-thirds (67%) were spending more nights at home, with eating out increasingly viewed as a treat reserved for special occasions. Further evidence of the cash-strapped nature of many people was the fact that over 45% of respondents in the survey had reduced the amount left as a tip when dining out. Perhaps most significantly, many felt that, after the lifestyle changes they had made, they were unlikely to revert to their previous habits once the economic situation eases.

Despite the worsening state of the economy, research undertaken by Tesco indicates that many consumers are reluctant to give up completely on lifes luxuries, which is where premium in-home dining comes in. The Tesco research also revealed some important differences between the sexes, with men favouring a red meat option and a good quality wine as part of the meal deal offered. In contrast, the majority of women mentioned the inclusion of a chocolate dessert as the most important component.

Although the UKs main food retailers have played a large role in developing the in-home dining market, consumer opinion suggests that more could be done to improve its attractiveness. According to Tesco, almost 80% of people expressed a desire for supermarkets to do more to provide them with the luxury and quality associated with eating out when dining at home. Over a fifth (22%) wanted a wider variety of fresh meals, while 18% desired more foods from around the world. On a related note, research from the Institute of Grocery Distribution (IGD) undertaken in 2007 found that almost 80% of UK shoppers thought pre-packaged and ready-to-cook foods tasted inferior to restaurant meals.

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Chapter 4 Consumer dynamics

Penetration of ready meals, a mainstay of the in-home dining market, remains above the European average in the UK. Around 70% of the countrys population buys into the category, although the frequency of purchase is now beginning to fall, amid concerns over the healthiness of processed foods. Nevertheless, the continued increase of one- and two-person households (which represent a core target audience) suggests that demand for ready meals is unlikely to experience any significant fall in the near future. Pastabased meals remain the favourite dishes amongst the UK population, ahead of Chinese, Indian and traditional British recipes.

Elsewhere in Western Europe, the majority of consumers have been reducing their expenditure as a result of the downturn. According to a 2009 survey from McKinsey, over half (51%) of respondents claimed to have been saving more of their income since the European economies went into recession, with spending on recreational and leisure goods hardest hit. As is the case in the UK, people are eating meals outside the home far less frequently.

Prior to 2008, almost 46bn meals were eaten outside the home in the EU region. However, this figure is believed to have fallen significantly over the last couple of years, mainly as a result of the economic situation but also due to the introduction of smoking bans in foodservice establishments in countries such as France and Belgium. The situation appears to be rather different further east, where dining out is increasingly replacing the home as a place for eating and entertaining in Russia. Although economic growth has also stagnated in parts of Eastern Europe, the resulting effect on the dining-out market is not thought to be as severe as the situation in the west.

Despite the downturn, eating out remains a regular and well-established habit across most of Europe. Almost 90% of the Irish population eats out on a regular basis, while more than 40% of the German population claims to eat meals outside the home more than once a month. French consumers eat out on average three times per month, while almost 60% of the countrys adults cook meals in the home every day. In per capita terms, the number of meals eaten out is particularly high in Spain, at more than 160. This compares with 140 in the UK and 130 in France.

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Chapter 4 Consumer dynamics

North America One of the major effects of the economic recession in the US has been a reduction in both the number of times consumers eat out, as well as expenditure levels via foodservice channels. The average frequency of eating out has traditionally been amongst the highest in the world in the US, with 75% of consumers dining away from home at least once a week during 2005. However, since the end of 2007, the average number of times US consumers eat out has dropped from 1.5 to 1.2 times per week. Over half (52%) of the US population is now thought to be dining out less frequently.

A survey of 1,000 consumers carried out by AlixPartners in the first quarter of 2009 found that upmarket restaurants have been the biggest casualties of the downturn in consumer spending. According to the survey, the average number of monthly visits to fine dining establishments dropped by 36% in 2009 compared with the same period the previous year. In the words of a source from AlixPartners: The core driver for diners continues to be value, value, value that determines how often people eat out, and where they eat out.

The survey also found that consumers expected to spend almost US$11.50 per meal when eating out, which was 20% less than the average expenditure in 2008. The conclusion to be drawn is of one of US consumers opting for cheaper alternatives as far as meals are concerned, and while quality remains important, most people are increasingly shunning luxury dining outlets.

As the frequency of dining out has declined, more US consumers have been entertaining at home instead. A 2009 survey carried out by the Chicago-based food industry consultants Technomic found that 36% of respondents claimed to be entertaining others at home more often compared with the previous year, while just 13% said that they were doing so less frequently. The signs appear to be encouraging for the future of the in-home dining sector, since 40% of the surveys respondents expected to entertain at home more often over the next couple of years.

It is thought that up to 40% of the adult population in the US regularly entertains others in the home. Analysed by socio-demographic group, it is young adults aged between 18-years-old and 24-years-old who are most likely to entertain others at home, typically five or more times per month. During the course of 2008, the number of home entertainment occasions in the US rose by up to 30%. The main reason behind this growth is the fact that people are

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Chapter 4 Consumer dynamics

increasingly inclined towards socialising in a more casual atmosphere than is typically found in many restaurants.

Over 60% of the respondents in the Technomic survey claimed to be buying more prepared meals and dishes from supermarkets compared with the previous year. The fact that people are increasingly seeking something special with which to impress their guests is illustrated by data from the National Association for the Speciality Food Trade. According to this trade body, 36% of US adults purchased speciality and/or gourmet foods for in-home entertaining in 2008, while a further 18% kept them on hand for unexpected guests.

Restaurants as well as grocery retailers have benefited from the trend towards entertaining in the home, mainly because consumers are most likely to serve appetisers and dishes familiar to them from eating out. One such example is sushi, although platters also represent a popular option at times of the year such as Christmas and Thanksgiving. According to the Technomic study, 68% of consumers used restaurants to source foodstuffs for in-home entertainment occasions, compared with 69% for food retailers. Over half (53%) did so for occasions falling over the holiday period.

Some further insights into US dining and eating habits can be gleaned from the annual Food Shopping Trends Tracker survey carried out by Harris Interactive for the grocery retailer Whole Foods Market. The 2009 survey (which included almost 2,200 respondents) found that 68% of US adults had changed their eating habits as a result of the recession, with over half (51%) now eating dinner at home more frequently. Almost 80% of respondents claimed to like cooking and preparing meals at home, while 44% enjoyed eating their favourite foods in the comfort of home. Less than a quarter (22%) of respondents claimed not to cook at home at all.

Across the border in Canada, recent data suggests that consumers were cooking and eating more meals in the home during 2009 compared with previous years, as well as trading down to cheaper groceries such as privatelabel foods. As a result of these trends, the frequency with which Canadians are eating out has fallen since the start of the economic downturn, with the average person eating 38 dinners in a restaurant during 2009. Furthermore, when people do dine out, they are increasingly opting for cheaper venues.

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Chapter 4 Consumer dynamics

According to the most recent version of the Eating Patterns in Canada report by the NPD Group, Canadian households ate just over two-thirds (67%) of their meals at home in 2009, down from 75% in 2005. However, there is relatively little evidence of people cooking more meals from scratch, as a result of which opportunities exist for the in-home dining sector. Between 2003 and 2009, the average number of meals cooked from scratch during the course of the year dropped from nearly 425 per household to 380.

Rather than preparing meals themselves, Canadian consumers appear to be turning towards concepts such as home meal replacement (HMR) instead of eating out. This trend is particularly evident amongst older consumers; according to the NPD report, Canadians aged 65-years-old and over sourced 33 dinners from these channels on a per capita basis in 2009. This figure drops to 20 dinners for consumers aged under 65-years-old. Given Canadas ageing population, demand for HMR dishes can be expected to remain relatively high in the short to medium term.

Other markets As is the case elsewhere in the world, the restaurant and eating-out market has been one of the major casualties of the recession in Australia. A recent survey of 1,500 consumers by HJ Heinz found that most had been cutting back on takeaways and eating out in the face of the downturn, while separate research from ACNielsen found that expenditure on food through grocery channels had grown at the expense of foodservice outlets. The same source also found that more shoppers were seeking out cheaper private-label products when grocery shopping.

According to ACNielsen, more Australians are now opting to entertain family and friends at home instead of going out. This finding was echoed in a separate study by research group TNS, which focused on the Brisbane area and concluded that spending on eating out and takeaways suffered a dramatic fall in the six months ending May 2009. In contrast, expenditure on groceries increased, although this was partially attributed to rising prices.

Some noteworthy conclusions regarding the eating habits of Australian families can also be drawn from other consumer research carried out during 2009. This was carried out by local websites such as www.kidspot.com.au and www.birth.com.au, and surveyed up to 5,000 Australian families. The results

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Chapter 4 Consumer dynamics

found that takeaways remain popular in Australia despite the recession, with over 60% of families having a takeaway meal at least once a fortnight. This drops to 41% for households containing no dependents aged 18-years-old and under, which is slightly surprising given that takeaways tend to be associated with childless adults.

Despite these relatively high penetration levels, the survey also indicated that 46% of respondents were eating more home-cooked meals in 2009 compared with the previous year. Almost two-thirds (65%) of respondents claimed this was to save money, while 62% said this was for reasons of health. Around 90% of Australian families eat a home-cooked dinner five or more nights per week, with a sizeable 97% of respondents considering it important to sit down to eat together as a family. This suggests that the recession has increased the attractiveness of home-cooked meals to the majority of Australian consumers.

Elsewhere in the Asia-Pacific region, the worldwide economic recession appears to have had little impact upon the inclination of Japanese consumers to eat out. In the year ending November 2008 (the last year for which data is available), the dining out sector increased its share of consumer disposable income from 3.5% to 4%. Although an increase in the number of Japanese people eating out is likely to adversely affect the in-home dining market, greater exposure to a wider range of dishes and cuisines in restaurants may also stimulate demand for these foods at the retail level.

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