Breakfast Catering. Executive Summary UK February 2013

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2 Helena Spicer Senior Food Services Analyst Innovation is crucial for operators looking to break consumers habitual routine of eating breakfast at home. This is especially true in an era of savvy consumerism and during a period when consumers enthusiasm for splashing out on eating out has been diminished following a period of heavy discounting and mediocre dining out experiences. 1

3 The Market Food inflationary pressures are a particular issue for eating out occasions such as breakfast and lunch which tend to be the most price-sensitive. These were a notable factor in areas like wheat prices in 2012, while pork price increases are expected for 2013/14. Whilst the trend towards widening breakfast menus to include more global and traditional dishes will insulate some operators to a certain extent, the inflationary pressures will continue to put pressure on margins. Going into 2013, people are less financially squeezed but low consumer confidence will ensure that the pressure is on operators to reignite consumers enthusiasm for spending on eating out generally, a strategy which will be particularly significant for categories such as breakfast catering which otherwise lack the experience draw of evening dining, making them vulnerable to consumer cutbacks. Consumers have come to expect that products are natural and are therefore less and less likely to pay more for products which have no artificial additives. However, their increasingly time-pressed lifestyles mean that consumers are increasingly drawn to valueadded labels such as contains one or more of your five-a-day. Companies, Brands and Innovation Who s innovating? Out of home Egg innovation Sandwich operators have been launching a greater range of hot grab-and-go dishes in recent years in order to appeal to consumers heightened sense of value for money and convenience in the lunchtime market. This has also been reflected in the breakfast market with NPD such as Leon s Egg Pots in March 2012, featuring among others a Full English Pot with a poached egg topped with sausage, bacon and beans. Anecdotal evidence suggests a growth in egg dishes on restaurant breakfast menus with recent trends towards dishes such as eggs en cocotte (baked eggs) which have the added benefit to restaurants of being seemingly less easy to replicate at home, or in the retail channel, as well as being readily customisable. For example, Giraffe launched menu additions such baked eggs cocotte with mushrooms and spinach and its Brekkie Burrito with scrambled eggs, chorizo, jalapenos and cheese in autumn Customisation and variety Customisation features regularly across a number of breakfast food trends from poached egg pots to Greek yoghurt or porridge dishes as operators look to provide added value as well as reduce the chance of menu fatigue and reignite consumers enthusiasm for spending on eating out. This should be well placed to interest the more than quarter of breakfast users choosing their venue based on menu variety. New products from the US could also serve as points of inspiration for UK operators such as smoothie bowls. These products tend to be made with similar ingredients to smoothies but are made more substantial with the addition of ingredients such as granola. Product launches in the US include Robeks Smoothie Bowls which it describes as thicker for a more satisfying meal and is made with good-for-you ingredients: 0 fruit, pure fruit juices, yogurt and a nutritional Boost, eg it can be topped with trail mix, fresh fruit or granola. The brand claims the concept is available in all its smoothie flavours. Branded retail products As consumer confidence remained volatile in 2012, operators continued to leverage the trust and quality guarantees enjoyed by established retail brands through cross-promotion to promote their own breakfast ranges. For example: 2

4 JD Wetherspoon reported entering into a partnership with MOMA Foods, known for its oat and yogurt breakfast pots, at end The pub chain s menu now includes porridge with honey and banana and porridge with strawberry and blueberry compote. Crown Carveries moved to serve only Heinz Beanz on its breakfast menus in summer In June 2012 pub operator Barracuda added Ocean Spray cranberry juice and orange juice, alongside Costa coffee and Twinings flavoured teas and PG Tips tea to its menu. (The company has since restructured and rebranded as Bramwell Pub Co.) In 2012 Little Chef partnered with Lavazza to serve branded coffee at its outlets. Who s innovating? In home Breakfast cereals Indulgent flavour innovations are now common in cold breakfast cereals as manufacturers hope to remain competitive against an increasing number of alternative breakfast foods such as cereal bars, breakfast biscuits, pastries and yoghurts. Breakfast Biscuits and McVitie's Breakfast Porridge Oats Biscuits. Bread and baked goods While the bread market as a whole is under pressure from competition from alternative breakfast foods, selected segments have performed well in recent years, with speciality breads and selected morning goods gaining market share in this category. Consumers receptiveness to alternative breads has also been reflected in the sandwich market with recent launches using for example onion bread and sliced herb bread. Yoghurt and yoghurt drinks Exotic fruit flavours and limited edition product launches such as Onken Limited Edition Orange & Fig Yogurt are aiming to keep consumers engaged in the yoghurt category. Meanwhile, products such as Sainsbury s Eton Mess yoghurt pot reflect operators ongoing attempts to widen yoghurts consumption throughout the day and could be used as a point of inspiration for foodservice operators looking to develop more innovative breakfast/snack options. In hot breakfast cereals, the trend towards portable porridge pots and innovative flavour variants is encroaching on out-of-home operators USP of offering convenient, hot food on the go. Cereal bars The new breakfast biscuits category meets consumer demand for convenient grab-and-go options and is intensifying market conditions for more traditional breakfast products. Since the entry of Belvita to the market in 2011, there are now a number of branded and own-label products in this category including highprofile brands such as Quaker s Oat So Simple 3

5 The Consumer Frequency of eating breakfast in and out of home Which one of the following most closely describes how often you eat breakfast at home and out of home (eg on the way to work, in a café, at your desk)? Figure 1: Frequency of eating breakfast in and out of home, November 2012 Types of breakfast foods eaten in and out of home Which of the following foods do you usually eat for breakfast? Select all that apply. Figure 2: Types of breakfast foods eaten at home and out of home, November 2012 Base: 1,830 internet users aged 1+ who have breakfast at home at least once a month/707 internet users aged 1+ who have breakfast out of home at least once a month Everyday/Almost every day 8 Breakfast cereal/granola/muesli Toast/toasted bagel etc Around 2-3 times a week 17 Porridge Cooked breakfast (ie full English*) Once a week Once a month 1 11 Fruit Yoghurt/yoghurt drink Hot roll/sandwich (eg bacon roll, sausage sandwich) Less than once a month Never Cereal bars Pastries (ie croissant, pain au chocolat, muffin) Cold sandwich Other 5 3 Meal replacement shakes 3 Out of home At home Around a quarter of consumers eat breakfast out of home once a week or more, highlighting a sizeable potential audience for foodservice operators, while four in ten state that they never do. Usage tends to fall with age and as consumers leave employment. Consumers tend to be highly value-focused in the breakfast market, fuelling and facilitated by the wealth of price-led promotions employed by operators in today s market such as bundled deals. There are hints towards more specific targeting when it comes to breakfast such as using Champagne/Prosecco packages in order to heighten the treat element of eating breakfast out of home at weekends. Specific targeting is also being used by some operators to make price promotions more reward-led to loyal fans rather than the more blanket approach which puts greater pressures on margins unnecessarily Out of home At home * full statement reads Cooked breakfast (ie full English, beans on toast, boiled egg, omelette) Consumers are looking for added value products when purchasing breakfast out of home with the most popular out-of-home breakfasts being cooked breakfasts, hot rolls/sandwiches and pastries. In comparison, breakfast at home tends to be less treatfocused and more of a perfunctory affair with the most popular choices being cereal/granola/muesli, toast/toasted bagel and porridge. There is a growing variety of breakfast trends now available as operators have adapted to a number of trends such as consumers increasingly hectic and onthe-go lifestyles. Variety is also a key tool used by operators to ensure that consumers see breakfast as a treat occasion/experience purchase, thereby making it less vulnerable to cutbacks. 4

6 Younger consumers are the most receptive to alternative breakfast formats (eg cereal bars, breakfast pots), whilst older consumers, who tend to eat out less frequently, are more likely to be looking for traditional treat purchases such as full English breakfasts. Regional bias also affects breakfast choice with those living in urban areas the most receptive to new breakfast formats, particularly those which are convenience-driven, whilst those in regions are more committed to traditional breakfast foods. Where breakfast is eaten out of home In which of the following locations do you eat breakfast out of home? This highlights the opportunities for desk-friendly breakfast formats, the competition that canteens face from other out-of-home operators and the need for them to keep up with high street trends in order to remain competitive. Where breakfast is bought out of home You ve indicated that you eat breakfast out of home. In which of the following locations/outlets, if any, do you usually buy it from? Figure 4: Venues visited to purchase breakfast, November 2012 Base: 707 internet users aged 1+ who have breakfast out of home at least once a month Figure 3: Where breakfast is eaten out of home, November 2012 Grocery store (eg Tesco, Sainsbury s) Cafe/bakery (eg Greggs) Fast food outlet (eg McDonald s) Coffee shop (eg Starbucks, Costa Coffee) Work canteen 21 Base: 707 internet users aged 1+ who have breakfast out of home at least once a month Sandwich shop (eg Subway, Pret a Manger) Restaurant/pub In-store restaurant (eg a café in a store*) School/college/university canteen Motorway service station/petrol station Other retail outlet (eg Boots, Marks & Spencer s etc) At work/school/college 50 Other I eat but do not buy breakfast out of home 7 At a restaurant/coffee shop/café/fast food outlet etc On the go (eg on the train, in the car, while walking to work) 33 * full statement reads In-store restaurant (eg a café in a department store) Other Portability and convenience are key drivers in the breakfast market as a third of those who eat breakfast out of home once a month or more do so on the go (eg on the train, in the car, whilst walking to work). Whilst 50 of out-of-home breakfasters state that they eat breakfast at work/school/college, only 21 state that they make these purchases from work canteens and from school/college/university canteens, signalling how breakfast at the desk has become a part of the nation s food habits. Driven primarily by demand for low prices and convenience, the top three venues where users buy breakfast out of home are grocery stores, cafés/bakeries and fast food outlets with coffee shops lagging behind in fourth place despite the large outlet portfolios of specialist coffee shop operators. Time constraints during the week and consumers prioritising leisure experiences contribute to the fact that only 14 of users eat breakfast out of home at restaurants. However, some venues are attempting to appeal to consumers more by elevating breakfast to the status of an experience in its own right, eg Sunday Champagne breakfast/brunches. 5

7 Factors affecting breakfast purchase venue choice When buying breakfast out of home, which of the following are important in helping you choose one venue over another? Select all that apply. Figure 5: Factors affecting breakfast purchase venue choice, November 2012 Breakfast menu enticements Thinking about buying breakfast (either in or out of home), how interested or disinterested would you be in buying the following types of breakfast? Figure : Breakfast menu enticements, November 2012 Base: 707 internet users aged 1+ who have breakfast out of home at least once a month Base: 1,902 internet users aged 1+ who eat breakfast either in or out of home Convenient location 59 Dishes which keep you fuller for longer (eg porridge) Low price 54 Dishes made with fresh ingredients Fast service 44 Dishes which include one or more of your recommended five fruit/vegetables a day Menu variety 28 Added health benefits (eg vitamin-enriched) Friendly staff 23 Low-fat/low-calorie dish/drink Meal deal 20 Labelled as natural Discount/price promotion 20 Seating availability Other 5 17 Low in carbohydrates Dishes made using ethical ingredients (eg organic, free range) None of these Premium ingredients (eg artisan breads) Traditional breakfast dishes (eg smoked haddock, kippers) Lighter dishes (eg less filling) Dishes with ethnic flavours (eg Huevos Rancheros Mexican-style eggs) Any interest Neither interested nor disinterested Any disinterest Loyalty is low in the breakfast market given the fact that six in ten users state that convenient location helps them choose one venue over another. Low price is another key enticement for breakfast purchasers, highlighting the threat posed by convenience stores. Young consumers are the most price-sensitive with under-35s the most likely choose a breakfast venue based on low price or meal deals. Breakfast purchasers prioritise fast service over friendly service although nearly a quarter of users will choose one venue over another because of friendly service received in the past. Over a quarter of breakfast users state that menu variety affects which venue they choose (higher among over-45s) whilst meal deals and other forms of price promotion incentivise around a fifth of out-of-home breakfast users. Value-added labels are key enticements for breakfast users, which align with consumers general scrutiny of menus and venues in terms of giving them reasons to purchase, as well as acting as quality cues. For example, breakfast users top three menu enticements for this particular meal occasion are dishes which keep them fuller for longer, fresh ingredients and dishes which include one (or more) of their RDA of fruit/vegetables. Diet products such as low-fat/low-calorie dishes/drinks are more likely to divide opinion: whilst 45 of out-ofhome breakfasters are interested in these breakfast products, nearly a quarter state their disinterest in this category. Demand for traditional breakfast dishes and dishes with ethnic flavours peaks in urban areas. Operators in these areas are beginning to tap into the interest for nostalgic/historic dishes and ethnic flavours as they look to elevate breakfast from a refuelling exercise to

8 a leisure activity in order to make it less vulnerable to cutbacks in consumer spending. Age impacts consumers breakfast demands with older consumers showing more traditional breakfast behaviour, being disinterested in health-focused labels, premium ingredients or ethnic dishes. Those aged 25- are the most likely to choose health-focused dishes meaning that health labels would be particularly profitable for businesses in commuter/business areas. What we think Innovation is expected to play a key role in the breakfast market for achieving a number of aims, most importantly for reinvigorating consumers enthusiasm for splashing out on eating out. occasions such as lunch to buying breakfast products instead. There are also sector-specific barriers eg in the fast food market, barriers to purchase for consumers here include lack of association with the early morning occasions as well as concern with product freshness and menu range, with fresh ingredients ranking among the three most important menu enticements. For operators looking to enter the market, the key features consumers expect them to deliver on in the intensely competitive market include the challenging combination of the right location, accessible prices and strong added-value features on their menu. Innovation in packaging and product formats has allowed healthy fast food operators such as Leon to meet consumer demands for convenience eg through portable hot food (eg poached egg pots with a variety of toppings), an area which restaurants will likely need to mine further to continue to differentiate their offerings from the growing retail offerings in the highly price-sensitive market. Menu innovation in terms of the use of ethnic flavours/dishes on breakfast menus (eg Huevos Rancheros) is also helping traditional breakfast menus to achieve differentiation from in-home breakfast options as well as aiding specialist ethnic operators in breaking into additional day parts, the consumer research for this report suggesting robust, though still niche, demand for such innovation. The central importance of convenient location to outof-home breakfast purchases also suggests opportunities for operators enjoying high passing footfall. There are, however, a number of barriers to entry and/or concerns that operators thinking of entering this market should consider. For example, there is a risk that consumers may switch from higher-spending 7

9 Helena Spicer Senior Food Services Analyst Telephone +44 (0) Helena produces and writes for the Foodservice journal, covering the restaurant and pub markets as well as contract catering. She is primarily responsible for all of the foodservice reports as well as several pub and drink related titles. Helena joined Mintel in 2005 to produce reports for the Leisure team. She has a BA (Hons) in Politics, specialising in international relations. 8