Home delivery in Britain growing 10 times faster than eating-out market

NPD Group says delivery channel is worth 50% more than 2008 as even pubs begin delivery. How long will it be before getting breakfast delivered to our home or workplace becomes routine?

London, March 2nd 2017 – Global information company The NPD Group says the delivery channel in Britain’s eating-out foodservice market (known as out-of-home or OOH) was worth £3.6 billion as of YE December 2016, up 6% on the previous year. The delivery channel has grown rapidly, up nearly 50% in value terms since 2008.

Last year delivery grew 10 times faster than the total OOH market. While total visits to ‘eat out’ increased just 1% year-on-year to 11.3 billion, the delivery sector jumped nearly 10% to 599 million visits in 2016. Most delivery business (over 80% of visits) is through the fast-food QSR channel, but pubs are now part of the picture too as they begin to partner ‘aggregator’ brands such as Deliveroo, Just Eat, Hungry House and UberEATS. The aggregator brands are a big catalyst in the success of delivery.

Pubs, millennials and brekkie

Although British pubs only account for 4% of the delivery market, they increased their delivery visits by 59% in 2016 over the previous year.  Across the wider industry, at the end of 2016, delivery accounted for more than one in 20 (5.3%) of British OOH foodservice visits (versus 3.5% in 2008). Millennials (those aged 18 to 34) use aggregators heavily. The 18-to-24 age group especially has become a major source of demand accounting for 15% of aggregator delivery visits compared to 9% of total OOH visits.

Normally associated with evening meals, delivery has room to grow at lunch and even breakfast time. Currently, 65% of all aggregator deliveries are for dinner but breakfast currently accounts for just 5% of deliveries and lunch 11%, suggesting there is a clear market opportunity for expanding these occasions.

Cyril Lavenant, Foodservice Director UK at the NPD Group, said: “Ordering ready-to-eat food for delivery via an app or by phone is growing so fast that ‘eating in’ is becoming the new ‘eating out’. It goes beyond getting delivery of conventional ‘takeaway’ food because full-service restaurants are offering delivery too. Delivery obviously saves on the effort of visiting the foodservice outlet – ready-to-eat food comes to your door of course. But it’s now easier to duplicate at home the quality and enjoyment you always associated with eating out at a full-service restaurant.  Plus, you can effortlessly order a wide selection of takeaway food not just from one local restaurant but from several. Millennials are pushing the trend. It’s ultra convenient for them just to ‘tap an app’ to order.

“We believe delivery will keep growing. The aggregators will surely view the current low level of penetration at breakfast and lunch as irresistible market opportunities. How soon will it be until we go beyond getting a basic take-away breakfast on the way to work and opt instead for a fancy breakfast delivered to our workplace on a work day or even order a breakfast to our home when we are not working?

“By the end of 2020, the value of the delivery channel could grow by nearly 50% to reach £5.3 billion. This is based on a likely faster rate of 10% growth in 2017 and the same amount in each of 2018, 2019 and 2020.”

Delivering industry change

The growth of delivery through aggregators is shaking up the foodservice industry. The average bill for delivered food is nearly £1 lower than for a meal eaten on the premises. For YE December 2016, the average OOH on-premise bill was £6.9 but in the delivery channel it was £6.1. For full-service operators, such as a local Indian, Thai, Chinese, Japanese, Greek, Italian or Mexican restaurant, the difference is bigger at £12 for a meal on the premises versus £6.9 for delivery. Why is this? Delivery often works out cheaper because orders typically cut out beverages, starters, side orders or desserts. So, consumers choosing delivery are buying ‘lite’ versions of what they might order at a restaurant. The aggregators are effectively driving lower-value ‘virtual traffic’. Moreover, the ability to order from more than one restaurant is putting pressure on establishments accustomed to serving hitherto loyal customers in a small catchment area. At the same time, struggling independents are playing on a more level playing field when competing with the big branded foodservice chains.

Cyril Lavenant added: “Even though delivery business can often mean less revenue for operators, the delivery channel is growing so quickly that any foodservice operator lacking a delivery strategy is taking a distinct business risk. Consumers want delivery and if they find a local outlet is not doing it they will go somewhere else. Meanwhile, any foodservice operator offering delivery must find ways to encourage consumers to increase the value of their orders. A good tactic would be to create special meal deals that apply only to deliveries.”

Note to Editors:

Eating out: the data is for the British ‘Out of Home’ (OOH) foodservice market, comprising:

  • QSR (quick service restaurants)
  • casual dining brands
  • pubs
  • FSR (full-service restaurants)
  • hotels, department stores, motorway services, bars, airplanes, trains, ferries/cruise ships
  • workplace canteens
  • vending machines

Delivery is recorded as OOH business because the order is placed with a foodservice establishment that primarily caters to customers who want to eat out, even though the ready-to-eat food is eaten at home (or in the workplace).

Visit: means one person visiting a foodservice establishment. A mother, father and two children would count as four visits.

Delivery: this can refer to well-known chains such as Domino’s Pizza or Pizza Hut and many others, or to any small independent takeaway or a larger full-service restaurant that offers delivery. Traditionally, delivery can be requested by phone or online direct from a restaurant. Now it includes the delivery sub-category of aggregators such as Deliveroo, JUST EAT, hungryhouse and UberEATS.

QSR: the quick service restaurants that many consumers refer to as fast-food outlets.

Full-service restaurant: these include more formal / traditional restaurants and those serving Greek, Indian, Japanese, French and Italian food, as well as Chinese, Thai, Vietnamese, Mexican and Spanish restaurants. Full-service implies waiter service with food ordered at the table.

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