In 2019, across six of the largest foodservice markets that NPD tracks in Europe (Great Britain, France, Germany, Italy, Spain, and Russia), consumer spend for quick service restaurants (QSR) increased twice as fast as the total market. QSR had been able to offer options focused on long-term market growth areas such as breakfast, demand at travel hubs due to increased mobility, and a growing demand for delivery. They had also learned ways to better leverage digitization through apps and aggregators.
In 2020, during the pandemic, QSR did lose 24% of its consumer spend but the segment was much more resistant to the pandemic than the total market, which declined 38%. That segment is the most off-premise oriented and, therefore, was not hit as hard as the dine-in driven segments. In addition, they managed to quickly switch to new, requested service modes like delivery and click & collect.
In Europe, QSR has been an area of constant growth before the pandemic (since many of the growth drivers fall into the QSR space) and kept more stable during the pandemic because they could more easily adapt to the demanding situations.
The pandemic has caused the QSR industry to adapt at lightning speed over the course of one year. Following are some of my key takeaways from 2020:
The concept of ‘good locations’ for quick service restaurants has to be redefined
We may have to completely rethink what a ‘good location’ is both now and after the pandemic. Before the pandemic, QSRs and fast casual players were fighting for locations at travel hubs, large office areas and mall / shopping locations. Those days are gone. Today, residential areas have been growing in importance, which isn’t surprising given the changes to our private and work lives. New ‘good locations’ reside in areas where the community comes together - suburban centers that will become more lively places after the pandemic. Trust, loyalty, and the connection to the community will become stronger drivers for future decision making among consumers.
Coffee Bars and bakeries must find new ‘visit situations’ to appeal to customers
The Importance of coffee bars and bakeries differs greatly from one country to another. Overall, across the six big European countries, coffee bars stand for 13% of QSR spend, varying from 1% in France to 40% in Italy. The same applies to bakeries, where their importance for QSR and the overall eating-out market has been 11% (France), and 12% (Germany), vs. 3% - 4% in Spain and Italy.
Coffee bars and bakeries were suffering more during the pandemic, some operators losing almost twice the ratio compared to QSR in total. The reason is obvious: the decreased mobility of people, especially consumers working and shopping more from home, which reduced the need and demand for these places. Their traffic will return to normal as soon as people return to their workplaces and go back to shopping in brick and mortar stores.
The future for these businesses will be tough if they don’t develop new situations to overcome shortfalls due to expected changes in consumers’ work lives. No other QSR segment is so dependent on people going to work or school. So, no other segment is more negatively impacted by some of the changes that are expected to survive the pandemic: work from home/home schooling, less business travel, and more online shopping. Future growth can come from two areas: 1) offering ‘the third place’ to socialize for consumers living in the neighbourhood, especially for those that are tired from working from home in isolation; 2) open up and offer coworking spaces and informal meeting points. In both cases, the on-premise experience and convenience will be key success factors.
Delivery is booming but has even further growth opportunities!
Over the years, delivery has constantly outperformed the development of total QSR. But during the pandemic, delivery could even get a boost to a 32% spend growth in 2020 vs. 2019.
Operators specializing in delivery were collecting more than half of the delivery spend back in 2015. With an increasing number of QSR, but also full-service restaurants offering delivery, the ‘specialists’ meanwhile only show a 43% spend share. In other words, growth is driven by those developing this new delivery service types. So far, coffee bars have not been taking advantage of that.
While digital orders drive industry growth, phone orders are still important. Almost half of delivery orders are still placed over the phone. Across the six countries, Russia has the highest share of digital orders (76%), followed by Great Britain at 67%. Digital order adoption is slower in Italy, where two out of three delivery orders are placed over the phone.
Aggregators (such as UberEats, Just Eat, or Deliveroo) help to drive the growth – not only is delivery traffic more digital, it is also more strongly driven by aggregators. Whilst aggregators stand for 39% of all delivery spend, they collect almost three out of four euros consumer spend digitally for delivery.
According to NPD’s CREST research for 2020 vs. 2019, across the ‘Big 6’ countries in Europe, consumers spent 34% more for delivered food and beverages from restaurants. Even though delivery to our workplaces has taken a big hit over the past year, one quarter of deliveries still go to workplaces. This presents another opportunity for growth when this pandemic ends.