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Catering Market 2007
Key Note Publications Ltd, March 2007
The UK catering market grew by an estimated 4% in 2006 to £30.91bn at retail selling prices (rsp). The industry as covered by Key Note includes the following markets: restaurants; fast food and takeaways; contract catering and foodservice management; hotels; public houses; licensed clubs; and holiday camps/villages and caravan/camping sites. In 2006, the fastest-growing market was public houses, followed by restaurants. However, all markets demonstrated some growth during the year.
The catering industry is gearing up for the Government's smoking ban, which will be introduced across the UK by July 2007. The ban already applies in Scotland and its impact there suggests that large pubs serving high volumes of good food at attractive prices can benefit from it, although smaller pubs, with limited food capacity and a bias towards beer sales might suffer. To minimise the adverse impact of the smoking ban, many pub operators are developing their gardens and outside sheltered areas. Others aim to widen the social appeal of their pubs in order to attract new, casual dining customers, who currently avoid pubs because of tobacco smoke.
Many leading organisations in the catering industry, including most of the large pub companies, are investigating the opportunities provided by the Real Estate Investment Trusts (REIT) legislation, which came into effect in January 2007. REITs are tax-efficient investment vehicles that enable companies to set up, develop, manage and sell real-estate assets. They also allow participants to invest in a portfolio of properties. If the leading pub companies do not convert to REIT status, they could become bid targets from private-equity companies.
The UK catering industry continues to undergo a considerable amount of merger and acquisition activity. This was a particular feature of the public houses sector in 2006, although it has also occurred in most other sectors, including restaurants, contract catering, hotels and licensed clubs. In some of these markets, competition for acquisitions has pushed prices up to such high levels that future opportunities for consolidation activity might be limited.
Key Note forecasts that the UK catering market will produce further steady growth over the period to 2011. The UK economy is expected to remain favourable, a strong tourist market should help boost sales, and the expansion and refurbishment plans of many of the leading operators should add to the appeal and attractiveness of the various types of catering outlet. Slightly uncertain at present is the reaction of consumers to the smoking ban and the forecast drop in the number of young people in the population, which could have a negative impact on some markets.
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