How has the F&B sector changed in recent years throughout Europe?
There has been and continues to be, a significant shift in the structure and makeup of the F&B sector throughout Europe. We are continually moving at a pace from a transactional economy to an experience economy. Collecting, and ideally being the first to share, unusual and surprising experiences are now more aspirational than owning designer clothes. As a result, consumers are more willing than ever to invest in their leisure time. This has led to increased interest in eating out, with the rise of social media platforms fueling an obsession with food. As a result, the restaurant market is growing across Europe. The highest growth is occurring in less mature economies such as Poland and Turkey, but Scandinavia is not far behind. Mature markets like the UK and Germany, on the other hand, are relatively flat, growing in line with inflation. In terms of the offer, we feel that authenticity is gaining popularity again. Whether through provenance, street food or other factors – real food is on the rise.
Which trends, opportunities, and innovation in the European food and beverage market would you consider keeping an eye on?
There are three trends we are particularly excited about at the moment. The first is Dinertainment – new concepts that offer a unique experience and entertainment alongside food and drink. Examples include Swingers in London which combines crazy golf with street-food, Lucky Voice (Karaoke, dinner and drinks), and Bounce (table tennis, cocktails and DJ). These concepts are great for targeting a young, social crowd and large group bookings which tend to have a higher propensity to spend.
Another trend we are seeing a lot of movement in is ‘Clean Green’. Health is a growing concern as life expectancy continues to increase and some of the latest health trends include flexitarianism and veganism – driven by concern over intensive meat farming as well as our impact on the environment. On the back of this we have seen growth in this sector - By Chloe is a vegan burger restaurant with 10 outlets in the US and UK, and Holy Greens, a Swedish concept with 6 stores across Sweden, serving premium salads from local producers. Lastly, Vita Mojo is an innovative concept from London using technology to allow customisation through an app. As you dial up the protein, for example, the calories will automatically change. The best thing about this concept is that it all links to a back of house system tracking stock and wastage, meaning they can predict their stock by +/-3%. The concept has opened three stores and is looking to white-label their software to other brands. This is the great example of a concept that links together many trends from healthy eating to personalisation to staff-reducing tech.
The third trend is pick ‘n’ mix - the rise of the food emporium. Established brands such as Whole Foods and Dean & Deluca have expanded internationally, whilst Eataly has proved its formula works extremely well outside of Italy. These brands are great for creating vibrant spaces (enhanced by the merchandised product they sell) and offering something for everyone with a strong range of fresh and deli food, and consumers implicitly trust the provenance of the food because it is served within a premium grocer.
Do you think that the business model for F&B will need to be modified due to the changes in consumer behaviour?
Yes, absolutely. In developed economies, people are eating out more as working hours go up. This means that convenience and value are more important than ever. Cheap, quick and casual offers are gaining popularity, as we can see from the emergence of the Fast Casual category. Fast Casual concepts combine quick service with proper, hot food to offer single-course meals that require less time and effort than a typical restaurant meal. They work well in food halls as well as stand-alone units and often focus on one type of food which means they can deliver at pace and with a high degree of consistency. Another significant change is the rise of delivery, which is beginning to cannibalize restaurant visits and affect profitability – many of these delivery platforms charge a commission of 15-25% which can be hard for some business models to swallow. The delivery model is also affecting Restaurant design, which needs to be considered.
We are also seeing a step change in the lease structure models in the market. Lease lengths have gradually been decreasing in length and the likelihood is that ‘traditional’ 10 and 15-year leases will gradually become a thing of the past. Landlords and Developers want to be able to be agile to mix up their F&B offer, reflecting the pace of change in the market and guest requirements. Short term leases and concessions allow Landlords to react more quickly to market shifts, keeping the offer relevant and ‘on point’.
How are pop-up venues and operators contributing to the F&B sector?
Pop-up venues are a great way to keep a development’s offer fresh and trial out new concepts. We have seen a growing emphasis over the last two years by landlords/developers across Europe to provide some element of their overall foodservice offer as ‘pop-up’. Whilst, on one hand, it’s a ‘quick fix’ to fill vacant retail space and generate some income, on the other, it’s a great footfall ‘pull’, both for new and existing guests. Land Securities were pioneering in the UK with a monthly rotation of five pop-up units as part of the Trinity Kitchen offer.
From a Tenant’s viewpoint, particularly startups, pop-ups are an economical way of showcasing concepts without the commitment to a binding lease and associated costs associated with a bricks-and-mortar store. Of course, there are numerous examples where pop-up concepts have ‘graduated’ to permanent stores, in turn releasing space for the next generation of pop-up tenants. It’s a great ‘churn’ when executed correctly.
What are your thoughts on all the trends surrounding food at the moment like bio, organic, mindful consumption, traceability, sustainable products? Are they a passing fad or will they be relevant issue producers will need to acknowledge?
Definitely not a fad, but a trend which is here to stay. This is increasingly evident as studies reveal that Millennials and Gen Z are very concerned about sustainability. A Nielsen study showed that despite the difficult economic climate that Millennials grew up in, three out of four respondents will continue to be very happy to pay more for sustainable offerings, an increase from 50% in 2014. Likewise, 72% of respondents belonging to Gen Z are willing to pay more for products that come from companies committed to positive social and environmental impact. These two groups are shaping the market demand and supply of tomorrow and their clear focus is on sustainability and technology.
Many operators have already recognized that adapting to this trend is quickly becoming a business imperative and are making significant changes to their product range, operation and unit design. It is not just about healthier food, but about the better business overall and this also places responsibility on landlords, not only operators.
For more information on food trends in 2018 please see: