Prepared-meals from grocery stores are tempting consumers away from quick-service-restaurants. It’s happening in the US, how much will it affect the Australian market?
According to market research firm The NPD Group, in the 10 months from March to December 2015, more than 77 percent of American consumers spent at a fast food outlet, with more than 40 percent purchasing from a grocery store.
Lunch and dinner were the most popular meal purchases across all channels.
But the grocery stores are encroaching on the market: the in-store dining or takeaway meals bought in grocery stores have increased by 30 percent since 2008 reports the Nation’s Restaurant News.
“It’s a battle for market share, and it looks like some of the non-food concepts are winning,” said NPD anaylist Bonnie Riggs.
And it is the quality, freshness, variety and healthy food options at the grocery stores that are attracting customers who are regular fast food shoppers.
Riggs said “I don’t think QSR operators realise the magnitude of their vulnerability, especially at dinner, the daypart they have the greatest challenges.”
The Australian market
An IbisWorld market report, Fast Food Services in Australia (June 2014) predicted the greatest threat to the QSR sector will indeed come from supermarkets.
The updated report in December 2015 reads: "Over the next five years, external competition from supermarket chains and other hospitality industries will pose the greatest threat to fast-food retailers. Supermarkets are expected to expand their range of prepared meals, while restaurants and cafes are expected to capture a growing share of quality-conscious consumers."
Time-poor shoppers will be encouraged by supermarkets to shop for longer, suggests the IbisWorld report Supermarkets and Grocery Stores in Australia (July 2015).
“There is evidence of this trend emerging in 2015-16. Coles has already converted four stores in New South Wales to a new market-style layout, following the successful trial of its ‘foodie destination’ at Westfield Southland in Victoria.
“Customers are able to purchase Lavazza brand takeaway coffee instore, as well as a variety of takeaway options such as baguettes and pies that have been prepared instore.”
Supermarkets and grocery stores are competing with the cafes, restaurant and takeaway outlets for consumer dollars.
“Over the past decade, the number of Australians eating out has increased and households now spend a greater percentage of their income on meals outside the home. Expenditure on cafes and restaurants is forecast to increase in 2015-16, which may pose a threat to revenue for supermarkets and grocery stores,” reads the report.
So what's happening in fast food?
Just now in Australia the fast food sector has seen an additional three percent of business in the last quarter.
Overall the food service industry grew by four percent over this period, reports NPD, double the rate of the previous three quarters. This is due to increased visits and a higher average spend.
The QSR burger category was the winner for dinners but Aussies have been more diverse in their lunchtime choices: fish and chips, sandwich/salad/juice, supermarkets and cafes showing the biggest gains.
French fries, burgers, and sandwiches showed the biggest growth in servings this quarter, at the expense of desserts and beverages.
Coffee however, was the star performer, showing the largest gains in the market, with more caffeine consumed at lunch.
Consumers are becoming less price-led but are still budget-conscious, suggests NPD.