The fast food market - United Kingdom

2.1 The Global Fast Food Market

Global fast food market ****-****, world, in billions of dollars Source: ****

The global fast food market is expected to grow rapidly to reach nearly $*** billion by ****, growing at a CAGR of *.*% between **** and ****. This growth is mainly driven by emerging economies, where Western brands are becoming more prominent. In the Western world, fast food is also expected to grow, albeit at a slower pace than in emerging economies, despite growing health awareness and concerns.

This growth is driven by the fast and convenient nature of fast food, which allows it to keep pace with new lifestyles, as well as a wider range of products where healthy alternatives are also available. The fast food industry should therefore be able to respond better and better to the expectations of a significant part of the population that is not only looking for speed and convenience, but also for healthy food [***].

Overall, fast food restaurants are believed to have revolutionized the food industry. Both their past popularity and their increasing presence worldwide are demonstrating this thesis. Reasons for the rapid spread of fast food industry are: 

Change in lifestyle: work-leisure balance Change in consumer preferences Change in demographics: income level, sex, age

The two ...

1.3 The domestic market

 The fast-food market in the UK was valued at **.* billion GBP in **** and was expected to experience positive growth in the upcoming years.

Combined, branded fast food restaurants generated the largest share of fast food market value in ****. Traditional branded restaurants were worth *.* billion British pounds in ****, while branded restaurants with a focus on delivery generated over two billion pounds and branded contemporary restaurants a further *.* billion.

Fast food restaurants, also known as quick-service restaurants (***), are a lucrative segment of the foodservice industry.  It competed with pubs and bars, which are now the most popular dining out option for Brits, more so than traditional service-led restaurants. Branded fast-food restaurants made up an *.*% share of eating out market value in **** compared to *% for pubs and bars. [***]

Value of the fast food market, by type UK, ****, in billion GBP Source: ****

Although fast-food brands generated the largest share of market value, independent outlets almost matched the value of traditional fast-food restaurants. The UK was home to over ** thousand independent fast-food restaurants including takeaways in ****, the most of any other fast food restaurant outlet type, establishing their significance on the market. The UK takeaway market has traditionally been an important segment and has recently received ...

1.4 Covid Impact

The COVID-** pandemic has had devastating effects on many markets and industries. Due to the nature of the virus (***) sanitary measures were put in place, the most significant of which were mandatory, government-mandated closures that kept people home and halted most economic activity. 

Fast-food chains in the UK  reacted positively to the pandemic, fueled by investments and planned openings in **** and ****. The growth of fast-food chains stands in contrast to the travails of the wider restaurant sector, which has suffered under a series of government lockdowns that have allowed takeaway food to be sold but ordered dine-in restaurants to close.

In fact, one in six casual dining restaurants shut during ****, according to the industry research firm CGA: overall, *,*** food-led venues closed. The closure of casual dining chains and the administration of several large retailers such as Philip Green’s Arcadia, owner of Topshop, and Paperchase had opened up opportunities for new entrants to the UK’s fast-food market that would not have been possible before. The rush to expand has in part been driven by significant drops in property prices as the pandemic accelerates consumers’ shift to shop, order food and entertain themselves online. Rents have fallen as much as **% in ...

2.1 Demand Characteristics

Demand for fast food and takeaways is steadily increasing, with overall sales growth of **.* per cent compared to *.* per cent growth in ‘full service’ restaurant sales. While traditional restaurants still represent the largest portion of the market at **.* per cent, this represents a *.* per cent decline over the last year. By contrast, fast food and takeaway sales are up **.* per cent, as mentioned, now capturing **.* per cent of the market [***].

Another important element of demand for out-of-the-house food consumption is the expenditure that UK citizens are devoting to this activity. The report by Barclays, which also suggested the figures mentioned above, revealed that "while customers appear to be dining more frequently, they’re doing so at a lower cost".

Average transaction values have indeed fallen, even if slightly, by *.* per cent, over the two years covered by the analysis (***). This trend, coupled with the growth in online sales, clearly favors lower price-point outlets such as fast food restaurants. 

In terms of favorite outlets, a survey conducted by YouGov in the UK, collected the answers to the question: "Which of these fast food places have you bought food from in the past month?". The following graph shows the results of this ...

2.2 Top 5 Growth Spots for Demand of Fast Food Meals

The Barclays report mentioned in the previous paragraph, shows how, in the UK, demand for fast food and takeaway meals is divided between the North and the South of the country, as, while the latter accounts for the largest overall share of sales (***), the first is generally performing stronger. On-premise sales in the north grew by **.* per cent year-on-year in contrast to *.* per cent in the south.

The research also revealed that the top five growth spots, as measured by on-premises sales, are outside London.

Top * Growth Spots for Demand of Fast Food Meals

UK, ****, in %

Source: ****

2.3 Consumer Profile

There is some evidence to suggest that patterns of eating out may vary by age and socio-economic status. The out-of home food environment (***) is increasingly a major part of the diet of younger adults and adolescents. On the other hand, home appears to be the most important location of food consumption for older adults, who are less likely to go to restaurants, fast-food outlets or pubs. Moreover, some evidence indicates that children from lower income households are more likely to eat takeaway meals at home or purchase food from outside school. In contrast, the evidence on adults is mixed, with some evidence that adults with lower income tend to consume more takeaway meals eaten at home, compared to those with higher income who tend to spend more on restaurant and café meals [***].

This is also demonstrated by the graph below, which shows the frequency of eating out at a fast food restaurant of different age groups. We can see how the highest frequency is encountered in the youngest, the British between ** and ** years old, while the lowest frequency is characteristic of the oldest age group (***). 

Frequency of eating out at a fast food restaurant, by age UK, ****, in % Source: ****

2.4 Demand Drivers

Having a look at the main trends which have been going on in the past years in food consumption in the UK, we can form a better idea of the most important demand drivers for this market. A study by Rand provides an excellent summary of these trends:

*. What people consume falls short of dietary guidelines;

There have been reductions in salt, sugar, and red and processed meat consumption, but consumption of fruit, vegetables and fiber has shown little or no change.

*. The channels through which consumers purchase food are diversifying;

The online grocery market is increasingly important, leading to an increase in supermarket home delivery and other forms of home delivery (***).

*. The out-of-home food environment is increasingly common;

The importance of the out-of-home environment is facilitated by digital technology and the expansion of online food delivery platforms, particularly new players such as Deliveroo and Uber Eats. 

Main reasons for eating out UK, ****, in % Source: ****

The graph above shows the results of a survey conducted by Britvic which focused on the reasons why British people choose to eat out. As it can be seen, the most relevant reason cited by the respondents is that of having a "quick ...

2.5 New Trends in Demand

Consumers are more aware than ever about their food; where it comes from, whether it's organic, its carbon footprint and various other environmental factors. New and improved manufacturing regulations have been put in place to cope with these new demands; consumers are also willing to pay a premium for better quality food and ingredients. This trend is beginning to expand across the whole fast food industry.

KFC is the biggest fast-food chain to comply to the new European Chicken Commitment for farmed chickens, with competitors like McDonald's and Burger King expected to follow to comply with similar standards.

Moreover, ** million of people in the UK are thinking of cutting down their meet consumption. An example of how this is being met by fast food chains in the UK is represented by Greggs, the British bakery chain, which following on from their vegan sausage roll success (***), is looking to create vegan variations of popular products such as steak bake and doughnuts. JD Wetherspoon's also added its first ever fake-meat plant-based burger to its menu recently.     

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3.1 Market structure

The fast-food market is driven by independent fast food outlets and branded traditional ones. The UK hosts over ** thousand of the first kind and over * thousand of the second.

In terms of distribution, the map below shows the density of takeaways per **** people.  East Central London is the most takeaway-heavy area in the UK, with one fast-food joint for every *** people. On the other hand, St. Albans is the country’s city most lacking in takeaway restaurants, with just one per **,*** residents. 

Aside from East Central London, all areas in the top ** list of takeaway hotspots are in The Midlands or the North of England. No other area has anywhere nearly as many establishments serving takeout food as East Central London, and the second biggest takeaway hotspot in the country is Lincoln, at *.** takeaways per **** people. Leicester sits just below in third place with its takeaways calculating to *.** per **** people. 

Takeaways per **** peopleUK, ****

Source: ****

3.2 Value Chain of the market

The value chain of the fast-food market is exemplified below.

3.3 Different fast food formats

Although fast food is often identified with mass produced food, the methodologies behind the transformation processes of the entire supply chain vary considerably depending on the type of fast food.

However, the common aspects for those companies are standardized products, limited service, limited equippement and skilled labour, and short waiting times, as the menu items are either partly cooked or do not require long preparation times. 

We can identify different types of fast food:

*. Fast food chains:

Most international fast-food chains offer highly processed and industrially produced food. The final product is prepared with standard ingredients and standardized cooking methods. As a matter of fact, menu items are prepared at a central supply facility in in large batches to exploit economies of scale and are then shipped to the individual stores, which store them in large freezers. The stores are usually not equipped with sophisticated equipment or highly skilled labour to keep the costs low. When customers orders a menu item, it is quickly reheated, cooked or assembled and served in cartons or bags or plastic wrapping. This process ensures a consistent level of product quality and product offering so that customers who order the same menu items in the ...

3.5 Main payers

The most important players of the market are established fast-food chains, in particular:

McDonald's Domino's KFC Subway Burger King

The graph represents the proportion of searches for a given word in a given region during a given time period, compared to when it was most searched (***). Thus, a value of ** means that the keyword was used less often in the given region, and a value of * means that there is not enough data for this keyword.

In this case, we chose to display the average weight of these fast-food chains on google searches volume. The only reason why McDonald's is more popular than Domino’s is because of their March through April campaigns which attract a lot of (***) traffic and, consequently, a lot of traffic to their stores. [***]

Most popular fast food restaurant, by Google search UK, ****, in % Source: ****

4.1 Fast Food Subsegments

There are several sub categories into which one can decompose the fast food market. The most popular variable to distinguish those fast food categories is the type of food sold, which can essentially trace back to the country of origin. 

According to their geographical origin, fast foods are segmented into :

Asian inspired fast foods represent the fastest growing category within the fast food industry – global sales have grown by ***% from **** to ****, which corresponds to the same growth of the Middle Easterns, Chicken, Italian, and Mexican, combined. [***]

In general, there are different fast food concepts:

American burgers and fast food (***) Bakeries and sandwich shops (***) Pizzerias (***) Tacos  Kebabs Healthy fast food 

Beyond the type of kitchen and the concept, the expansion of the offer also includes the development of products for different meals, such as breakfast. McDonald's has opened one of the McCafé's offering breakfast menus (***).

4.2 Pricing

The fast food market is characterized by an intense competition and a high product substitutability, which makes price a powerful weapon to start a war. The original success of the fast food business model lays in a double variable: price and speed. Those are strictly interconnected, as in order to make a goof profit companies must sell a large quantity of products. 

Prices can drop as low as * euro per burger – example McDonald’s *£, *£, *£ meal - although usually the range for a meal goes between * and * euros.

The table below represents the prices of the most classic Menus (***) offered by the fast food players in the UK:

Source: ****

4.3 9 Fast Food Restaurants made in the UK

Among the vast offer of international fast food chains, in the UK there are also some fast food restaurants made in Britain which have gained popularity over the years. BBC America lists ten of these chains and describes their success stories:

Leon: Leon can be considered the British healthy fast food since the vision of its founders was, from the beginning, to combine healthiness and fast food to create that sense of quick and easy dining with healthy options which go from breakfast, to lunch and dinner. Poppies: Poppies is a renowned British Fish and Chips fast food chain, even if it counts only three locations in London. West Cornwall Pasty Company: The West Cornwall Pasty Company is a fast food chain in the United Kingdom specializing in making and selling British pasties. These pasties hail from Cornwall, England, but their shops are found throughout the UK, with ** spots in London alone. Chicken Shop: Chicken Shop serves rotisserie chickens that are marinated overnight, steamed and then spit-roasted over charcoal. The chain has four locations in london and is famous not only for its chicken, but also for its apple pie. Prêt A Manger: There are close to *** Prêt A ...

5.1 UK Fast Food Laws

The new law on fast foods and junk food has been announced the **th of May **** among a raft of bills included in the Queen’s Speech outlining the Government’s legislative priorities. The new law will ban TV advertising of unhealthy foods – products high in sugar, salt and fat – before a *pm when children could be viewing.

Advertising of discount deals for unhealthy foods will also be banned, while people will be rewarded with shopping vouchers for losing weight and exercising under an incentive scheme to encourage healthier living. Moreover, under this law, restaurants will be required to put calorie counts on menus.

This law is part of the general effort undertook by the UK government in order to cope with and fight against child and general obesity in the country which, from ****, has increased by more than **% both in men and women [***].

5.2 The Foods Safety Act

The main legislative body in terms of administration of food in the UK is the Foods Safety Act ****.

The Food Safety Act **** (***) provides the framework for all food legislation in the England, Wales and Scotland. 

The main responsibilities for all food businesses under the Act are to ensure that:

Businesses do not include anything in food, remove anything from food or treat food in any way which means it would be damaging to the health of people eating it; The food businesses serve or sell is of the nature, substance or quality which consumers would expect; The food is labelled, advertised and presented in a way that is not false or misleading.

6.1 Segmentation

• Leon
• Prêt à manger
• Yo! Sushi
• McDonald's
• KFC France
• Subway
• Burger King Restauration
• Gregg's