The vast majority of sectors globally have felt the coronavirus pandemic’s unprecedented sting, but some have been affected more than others. Three lockdowns over almost a year have caused irreversible damage to the hospitality sector in particular. The figures speak for themselves: 79% of foodservice business saw a decrease in turnover and experienced a net loss of 5,975 licensed premises, including pubs, clubs and restaurants closed permanently due to the crisis.
In the face of adversity, food services had to adapt and overcome. In that spirit, many eateries created luxury dining experience kits or listed their establishment on platforms such as Deliveroo, Just Eat and Uber Eats. Seeing opportunity in the chaos, a range of healthy food delivery kit companies have captured consumer’s attention, with revenues and web traffic skyrocketing.
Even post-pandemic, we expect to see three main trends in the food delivery market in 2021:
Even before the pandemic, Forbes reported that meal kits are the ‘next big trend’ in food services. Revenue figures across the last three years support this assertion. The food delivery market has been experiencing a rise in revenue for several years and is projected to reach US$6,543m in 2021.
Clearly, the pandemic has boosted the demand for meal kits, and other food delivery options as shopping in stores became more difficult. In May of 2020, when restrictions started to ease, a report found that only 41% of respondents felt comfortable returning to stores due to the threat of coronavirus transmission. Instead, many have turned to meal kit deliveries to keep them nourished without having to visit a supermarket or restaurant.
The hospitality sector has had to adapt to new circumstances. As a result, several restaurants have started to offer luxury dining experiences at home. Prestigious restaurants such as Rick Stein and Dishoom now offer luxury dine at home meal kits which are growing in popularity.
Our data reveals that there has been a significant increase in searches for luxury dining experiences at home. For example, from January 2019 to December 2020, there has been a fifteen-fold increase in searches. We also observed the percentage of traffic visiting the ‘dine at home’ sections of Rick Stein and Dishoom’s websites. Both establishments saw significant rises in traffic during periods of lockdown. For example, 13.49% of those that visited Dishoom’s website in May and June clicked through to the ‘dine at home’ section.
Several start-ups have emerged that offer luxury dining experiences that are delivered to your door to meet the growing demand. For example, Dishpatch has gained a significant amount of attention over the last year. The company act as a delivery intermediary between consumers and restaurants. In November, Restaurant Kits saw a steep increase in interest as the UK went into lockdown for the second time, as did GrEAT Food 2U. Social media sentiment is also telling, as interest in meal kit delivery start-ups spiked in November. Luxury dining experiences at home are certainly a foodservice trend to keep an eye on in the coming months.
Lockdown has made many of us think about our health. In a previous report, ‘How Lockdown Made Us All Think About Health and Wellbeing’, we found that meal kits that focused on fresh, healthy produce were gaining significant ground. For example, the German start-up HelloFresh posted a 120% year-on-year revenue gain in the third quarter of 2020. The company is confident that the meal kit trend will continue, as they expect revenue growth of 20% to 25% in 2021.
The demand for healthy, environmentally-friendly meal kits is growing. HelloFresh, Mindful Chef and Gousto are all taking the health angle in some form. For example, on the Mindful Chef homepage, the company outlines how healthy and sustainable their services are compared to their competitors. HelloFresh’s homepage states their meals are “Good for you. Better for the planet. Best for your wallet”, and Gousto features The Body Coach Joe Wicks’ review proudly on their website. As people grow increasingly concerned about their health, especially the more health-conscious and Millennials and Generation Z, they will seek quick, nutritious and sustainable solutions.
However, there is a price for healthy meal kits that some will not be able to afford. Ayisha Koyenikan, Global Food & Drinks Analyst at Mintel, explained that even though the meal kit is thriving, companies are suffering a “serious subscriber retention problem.” Consumers are clearly interested in the format, but they are sold at high prices, alienating lower-income households. Where do lower-income consumers turn to when they want restaurant food at home?
2020 was a successful year for the more traditional food delivery services such as Uber Eats, Just Eat and Deliveroo. In April last year, Uber Eats and Deliveroo were both considering layoffs due to the economic downturn caused by the pandemic. However, revenue for both Q1 and Q2 already exceeded the revenue for the 2019 financial year. During May and June, Deliveroo had been both “profitable and had a positive cash flow”, quelling earlier fears of financial losses or bankruptcy.
After recorded losses of up to £232 million in 2018, the pandemic enabled the delivery service to be profitable. Deliveroo CEO Will Shu said: “This year we have seen rapid consumer adoption of online food delivery, with more people ordering more frequently. Covid has accelerated strong underlying trends, and there is an enormous opportunity ahead”. UberEats is in a similar position, but delivery gross bookings grew 135% year-on-year during Q3 of 2020. The company hopes to slide into profitability next year, three years earlier than previous industry predictions.
The pandemic has affected UK consumers takeaway habits significantly. According to YouGov, around four in ten of those who order takeaways at least once a month before the COVID-19 outbreak say they are now ordering more frequently than before.
The good news for the big three food delivery companies is that they are seeing a rise in demand online. However, the increase in website traffic is less significant than that of the food delivery boxes. For example, Mindful Chef and HelloFresh saw 143% and 153% increases in site traffic year-on-year. Deliveroo, Uber Eats and Just Eat saw 97%, 41% and 16% rises respectively.
The big three have some serious competition. The pandemic has given them a much-needed boost in revenue when they were at risk of potential collapse. However, there are new services available that could steal the spotlight and a share of the revenue. While Deliveroo, Just Eat and Uber Eats make more revenue and receive more web traffic, other contenders are catching up. Will the big three see their revenue shrink as restaurants such as Rick Stein and Dishoom attract more customers? Or will HelloFresh, Mindful Chef and Gousto steal the limelight with their promise of healthy, sustainable food without the fuss? Only time will tell.
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