Mangia bene: what we can learn from the Italian casual dining sector

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Italy has long been hailed the home of the best food money can buy – a country where you would struggle to not find a delicious place to eat on any corner. In recent years, the Italian casual dining sector may have faced some big challenges, but it now appears to be recovering as consumers loosen their belts again (literally and figuratively perhaps).

Despite the economic instability triggered by political uncertainty that has been slowing financial deals across many sectors in Italy, it seems consumers have not been too negatively affected. According to NPD Group Inc., the Italian casual dining sector is estimated to reach 3% growth by the end of the year. Also, despite a decrease in transactions, national M&A has remained stable, creating an opportunity for investors to take over with smaller family-run businesses, possibly reinventing the sector.

In contrast, the British casual dining sector is struggling – just last week, Gourmet Burger Kitchen confirmed it would enter a company voluntary agreement to close 17 locations, joining a long list of other restaurants who have done so. Indeed, recent analysis has shown that pre-tax profits at the UK’s top 100 restaurant groups have fallen by 80% compared with 2017, and 37 of these 100 restaurants were making a loss. It is a worrying time for the sector, as appetites for chain restaurants in the UK seem to have disappeared. Perhaps, therefore, the Brits could learn something from their Italian counterparts.

While in the UK customers are used to chain restaurants, most of the Italian casual dining sector is dominated by local, independent, family-run trattorias, known for excellent quality food, with a multi-course meal that would make any mouth water. To protect themselves, these small businesses have had to modernise – the first step was to offer food delivery, for example, something that wasn’t common in the country until now.

As consumers continue to turn to online services for convenience and price, this move away from in-restaurant dining to home delivery has made sense for a previously struggling industry and could ultimately be heralded for revitalising the sector. In 2018 there has been a small but consistent increase of almost 2% in Italy’s food delivery sector, with a turnover of 5.5billion euros. For a country so proud of its tradition, this is definitely a trend to watch.

It is no surprise, therefore, that Glovo, who recently bought Italian food delivery service Foodora from Germany’s Delivery Hero, just raised 115million euros in funding. There is a great opportunity for private equity firms to regenerate the sector and allow them to compete again with traditional players in the industry, as many Italian businesses are still family-run. With a new point of view and some extra business expertise, the sector could soon be shining brighter than ever before.

A private equity success story in the Italian casual dining sector can be found in Temakinho, a chain of Japanese-Brazilian fusion restaurants, who BC Partners’ portfolio company Cigierre have acquired a majority stake in for 40 million euros. Earlier this year, onefourzero looked at the success of private-equity backed Wagamama in the UK, and Temakinho could be compared to them in terms of both the success and the recent investment the brands have received. Perhaps they could act as a model for future success stories in the European casual dining sector.

While Italians may still prefer independent restaurants, chains in the casual dining sector are becoming more popular, as evidenced by the investment in Temakinho and the arrival of Starbucks in Italy. This demonstrates that there are plenty of opportunities in the Italian market for investors, and plenty of room for creativity.

An interesting trend that can drive innovation is the opportunity to turn businesses around by making them more health conscious.  As flagged by a recent Euromonitor report, Italian consumers are now looking for less salts or animal fats and more vegetables, fruits and wholemeal products in their dishes.

As millennials drive the disruption in the Italian casual dining sector, companies must also invest on brand identity and social media presence as another way of reaching these customers. A full market analysis and digital due diligence can provide investors with a full picture of the market – regional or national – and its potential for growth.

For more information on how onefourzero’s digital insights can help you analyse the market and evaluate a brand’s equity, contact