The F&B Market - Sustainable Growth?

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Last modified on 21/08/2017

The UK food and beverage market has undergone a period of sustained expansion, which has not been replicated in other retail and leisure sectors since 2008. As the number of new restaurant entrants to the sector has grown and unit numbers increase, there have been some questions over the sustainability of this growth.

This is apt, especially when considering the increase in economic and political uncertainty due to Brexit and its future implications for the UK and the wider European region. 

For many analysts and commentators, the key question is whether the past growth in the F&B sector is indicative of a long term structural change in UK consumer spending habits or whether it is a cyclical trend that is at risk of tapering off in the years ahead. Cushman & Wakefield has undertaken a survey of 95 F&B operators (ranging from fast-food operators through to casual and contemporary casual operators), to assess future operator demand against future consumer spending forecasts in the F&B sector. 

 

Economic picture

Spending in the eating out market has consistently grown faster than the food and non-alcoholicbeverage market since 2014 and this trend is forecast to continue over the next five years.  Growth in the eating out market is expected to be 3.8% in 2017, well ahead of the average total consumer spend, which includes clothing and footwear, household furnishings and food. From 2016 to 2021, the eating out market is forecast to increase by 17% compared to growth of 14% in the total food market.

The eating out market was worth £88.1bn in 201 and is expected to rise by 3.8% to £91.4bn in 2017 in current prices. By 2021, the market is forecast to increase by 17% and be worth over £103bn. 

 

Occupier Demand

Occupier demand is also expected to strengthen, with the C&W survey suggesting a net addition of1,414 F&B units in 2017 and 1,515 in 2018. In keeping with the trends seen in recent years, this demand will increasingly be driven by multiple operators expanding their presence across the UK, with “mom & pop” restaurants closing as consumers move towards brands. The average spend required per site for the operators surveyed was approximately £1.3m between January 2016 and January 2017. With C&W tracking 336 new openings or 21% of total demand during this period, total spending requirements were approximately £443.5m. The rest of the expansion within the market was from predominantly independent retailers with a lower spend requirement. 

The increase in available spend suggests future conditions are more favourable than they were in recent years. 

Several downside risks remain, however, and the increase in the actual volume of spend is forecast to be limited in 2017 and 2018. The main risks include rising inflation, potential business rate increases (London much more affected than regions), a rise in the living wage and potentially tighter labour laws due to Brexit. These factors have the potential to adversely impact the F&B sector in the short to medium term and put pressure on certain operators and retail destinations.

For the full Cushman & Wakefield report, please click here

Thomas Rose
Head of Leisure & Restaurants
Cushman & Wakefield

Tags: Sustainability & Community Engagement , Technology & Innovation

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