The report by Adam Woods in last week’s Irish Farmer’s Journal about finding Irish steak on sale in Japan for €200/kg shows the potential when the highest-quality product is sold in the highest-value market. The Hilton Hotel in Tokyo where the steak was on offer is one of the most elite markets in the world.
However, it is just one part of the foodservice sector which is a growing outlet for agricultural produce across the world.
What is foodservice?
Irish farmers will be familiar with the big supermarkets but the foodservice out of home eating category is just as important. The sector includes global names such as Burger King and McDonald’s as well as lots of other chains. McDonald’s buys 40,000t of Irish beef annually which if it was a country, would make it Ireland’s fourth-largest export market for beef sales (volume).
Also known as ‘out-of-home’, foodservice describes all food that is eaten and prepared away from home. It includes everything from a cup of coffee purchased in a garage forecourt on the way to work, to lunch eaten in a workplace canteen, to a meal out in a local restaurant.
McDonald's buys 40,000t of Irish beef annually.
But it’s more than just the high-street restaurants, hotels, coffee shops and bars that we’re all familiar with, it also includes that half-time snack in Croke Park or the Aviva, food purchased in the airport or on board a flight, food served in hospitals, schools, universities and Government spend on food in prisons and the Defence Forces.
By its nature, it is far more complex than the retail channel, with many fragmented players and a longer supply chain, where distributors play a vital role in getting product from factory gate to consumer plate.
It is also the sector of the market that is growing fastest in the developed world and this will continue as technology has facilitated a surge in online home delivery purchases.
The size of the global foodservice market was valued at over $3 trillion in 2017, growing at a whopping annual rate of 5.6% according to US-based foodservice research company Technomic
In the US, almost 50c out of every $1 is spent on food out of home (foodservice), with the remaining 50c being spent on food for consumption at home (retail).
In Europe, that ratio is closer to 33c in every €1 spent on foodservice, v 66c on grocery – but this is changing, with the pendulum swinging in favour of a growing foodservice market. This is driven by modern technology-based lifestyles and reflects a change in consumer behaviour where people are very often spending longer hours out of their home on a daily basis (longer commutes, longer working days) and correspondingly, spending more of their money on food out of home. It’s also reflecting a younger generation of consumers for whom eating out is the norm.
Foodservice meets retail
These bullish growth rates are dwarfing average retail growth and not surprisingly, Retailers are grappling to enter this market.
So, for example, Dunnes Stores is investing heavily in its front of store offering with its Baxter&Greene deli, its Café Sol coffee and a wide range of food to go.
Retailers are removing shelving units previously allocated to groceries and replacing them with tables and chairs, effectively playing in the restaurant space.
In the US, this phenomenon is known as the “grocerraunt”. We’re already seeing examples of this in Europe, and are expecting further growth in this space, where struggling retailers are looking to introduce a sense of theatre to their stores, incorporating everything from pizza stations, to sushi conveyor belts, barista coffee, cheese and wine bars.
Innovation led
It’s also worth noting that restaurants tend to lead the way in food and flavour trends, which in time find their way on to supermarket shelves. From an innovation and new product development point of view, it’s important that food manufacturers stay close to what’s happening in the world of foodservice, understand how consumers are behaving, what they are looking for when eating out and how those needs and drivers in turn translate on to restaurant menus.
UK foodservice
The UK is Ireland’s biggest market for agricultural produce, buying half our beef, more than half our pigmeat and poultry, a quarter of our dairy and just under 20% of our sheepmeat.
In relation to the foodservice channel, the eating out market (all meal types) is forecast to be worth £91.1bn in 2019, up 1.8% from in 2018. Beef burgers are the most popular dinner dish, accounting for 10.2% of the market share, down 1% year-on-year. Many of the leading operators in foodservice have a British and Irish sourcing policy and promote this in their marketing.
Within the foodservice channel, average spend has increased but this has been offset by a reduction in footfall. Average spend increased by 2.3% to £7.58 driven by price inflation and the average number of meals per person dropped 6.2% to 15.64 in 2018. Parallel to this has been expansion of home delivery from foodservice outlets, made popular by apps for smartphones that make ordering simple.
Pressure on wholesale market
As well as direct sales to major chains, much of foodservice is supplied through wholesale markets.
According to Lavenpark market data, the UK wholesale trade for beef continues flat, as it has been for most of the past 18 months. Bord Bia’s London office reports that the current market is driven by plentiful supplies, while foodservice footfall has been decreasing throughout 2019.
Rungis meat market in Paris is typical of the big city meat markets that used to dominate the meat trade but have been of declining importance
One of the factors believed to be affecting this consumer trend is the uncertainty surrounding Brexit, which has had a wide impact on consumer behaviour across the high street and beyond.
The second element has been a sustained anti-meat campaign and growth in vegan practice. Kantar consumer data reveals a reduction in meat consumption of 6% in the UK which means that even where there isn’t an widespread adoption of a vegan or vegetarian diet there is still a reduction in beef consumption overall.
Vegetarian and vegan operators and meal solutions are also becoming more prominent in the market driven by consumer demand for such choice.
Prices
Over recent weeks, there have been signs that steak cuts, in particular sirloins, are picking up, but fillets continue to be slow. Topsides are slow and cheaper due to the time of year.
Hindquarter rumps, striploins and rib-eyes have increased by 5-10%, while for forequarter chucks, briskets and 95vl trim and 85vl trim prices have all remained stagnant. This is due to a steady, consistent trade for forequarter cuts.
For striploins Irish, British, Uruguayan and Argentinian beef are all achieving £11/kg to £12/kg due to stronger demand for these cuts and shorter stocks.
Polish steak cuts range from £2/kg to £4/kg cheaper than Irish beef. However, wholesale traders have suggested there is limited product coming through, with cuts tending to be smaller and inconsistent.
The UK wholesale trade is looking for uniformity for steak cuts in relation to size and marbling and thus appreciates and expects cattle to come through in similar weight brackets and skewed to traditional breeds of Hereford and Angus, with farm assurance demanded by virtually all buyers.
Looking at the summer months ahead, the wholesale trade is predicted to show little pickup, which aligns to seasonal trends as summer months tend to be quieter for foodservice operators while there are increased stocks available.
The report by Adam Woods in last week’s Irish Farmer’s Journal about finding Irish steak on sale in Japan for €200/kg shows the potential when the highest-quality product is sold in the highest-value market. The Hilton Hotel in Tokyo where the steak was on offer is one of the most elite markets in the world.
However, it is just one part of the foodservice sector which is a growing outlet for agricultural produce across the world.
What is foodservice?
Irish farmers will be familiar with the big supermarkets but the foodservice out of home eating category is just as important. The sector includes global names such as Burger King and McDonald’s as well as lots of other chains. McDonald’s buys 40,000t of Irish beef annually which if it was a country, would make it Ireland’s fourth-largest export market for beef sales (volume).
Also known as ‘out-of-home’, foodservice describes all food that is eaten and prepared away from home. It includes everything from a cup of coffee purchased in a garage forecourt on the way to work, to lunch eaten in a workplace canteen, to a meal out in a local restaurant.
McDonald's buys 40,000t of Irish beef annually.
But it’s more than just the high-street restaurants, hotels, coffee shops and bars that we’re all familiar with, it also includes that half-time snack in Croke Park or the Aviva, food purchased in the airport or on board a flight, food served in hospitals, schools, universities and Government spend on food in prisons and the Defence Forces.
By its nature, it is far more complex than the retail channel, with many fragmented players and a longer supply chain, where distributors play a vital role in getting product from factory gate to consumer plate.
It is also the sector of the market that is growing fastest in the developed world and this will continue as technology has facilitated a surge in online home delivery purchases.
The size of the global foodservice market was valued at over $3 trillion in 2017, growing at a whopping annual rate of 5.6% according to US-based foodservice research company Technomic
In the US, almost 50c out of every $1 is spent on food out of home (foodservice), with the remaining 50c being spent on food for consumption at home (retail).
In Europe, that ratio is closer to 33c in every €1 spent on foodservice, v 66c on grocery – but this is changing, with the pendulum swinging in favour of a growing foodservice market. This is driven by modern technology-based lifestyles and reflects a change in consumer behaviour where people are very often spending longer hours out of their home on a daily basis (longer commutes, longer working days) and correspondingly, spending more of their money on food out of home. It’s also reflecting a younger generation of consumers for whom eating out is the norm.
Foodservice meets retail
These bullish growth rates are dwarfing average retail growth and not surprisingly, Retailers are grappling to enter this market.
So, for example, Dunnes Stores is investing heavily in its front of store offering with its Baxter&Greene deli, its Café Sol coffee and a wide range of food to go.
Retailers are removing shelving units previously allocated to groceries and replacing them with tables and chairs, effectively playing in the restaurant space.
In the US, this phenomenon is known as the “grocerraunt”. We’re already seeing examples of this in Europe, and are expecting further growth in this space, where struggling retailers are looking to introduce a sense of theatre to their stores, incorporating everything from pizza stations, to sushi conveyor belts, barista coffee, cheese and wine bars.
Innovation led
It’s also worth noting that restaurants tend to lead the way in food and flavour trends, which in time find their way on to supermarket shelves. From an innovation and new product development point of view, it’s important that food manufacturers stay close to what’s happening in the world of foodservice, understand how consumers are behaving, what they are looking for when eating out and how those needs and drivers in turn translate on to restaurant menus.
UK foodservice
The UK is Ireland’s biggest market for agricultural produce, buying half our beef, more than half our pigmeat and poultry, a quarter of our dairy and just under 20% of our sheepmeat.
In relation to the foodservice channel, the eating out market (all meal types) is forecast to be worth £91.1bn in 2019, up 1.8% from in 2018. Beef burgers are the most popular dinner dish, accounting for 10.2% of the market share, down 1% year-on-year. Many of the leading operators in foodservice have a British and Irish sourcing policy and promote this in their marketing.
Within the foodservice channel, average spend has increased but this has been offset by a reduction in footfall. Average spend increased by 2.3% to £7.58 driven by price inflation and the average number of meals per person dropped 6.2% to 15.64 in 2018. Parallel to this has been expansion of home delivery from foodservice outlets, made popular by apps for smartphones that make ordering simple.
Pressure on wholesale market
As well as direct sales to major chains, much of foodservice is supplied through wholesale markets.
According to Lavenpark market data, the UK wholesale trade for beef continues flat, as it has been for most of the past 18 months. Bord Bia’s London office reports that the current market is driven by plentiful supplies, while foodservice footfall has been decreasing throughout 2019.
Rungis meat market in Paris is typical of the big city meat markets that used to dominate the meat trade but have been of declining importance
One of the factors believed to be affecting this consumer trend is the uncertainty surrounding Brexit, which has had a wide impact on consumer behaviour across the high street and beyond.
The second element has been a sustained anti-meat campaign and growth in vegan practice. Kantar consumer data reveals a reduction in meat consumption of 6% in the UK which means that even where there isn’t an widespread adoption of a vegan or vegetarian diet there is still a reduction in beef consumption overall.
Vegetarian and vegan operators and meal solutions are also becoming more prominent in the market driven by consumer demand for such choice.
Prices
Over recent weeks, there have been signs that steak cuts, in particular sirloins, are picking up, but fillets continue to be slow. Topsides are slow and cheaper due to the time of year.
Hindquarter rumps, striploins and rib-eyes have increased by 5-10%, while for forequarter chucks, briskets and 95vl trim and 85vl trim prices have all remained stagnant. This is due to a steady, consistent trade for forequarter cuts.
For striploins Irish, British, Uruguayan and Argentinian beef are all achieving £11/kg to £12/kg due to stronger demand for these cuts and shorter stocks.
Polish steak cuts range from £2/kg to £4/kg cheaper than Irish beef. However, wholesale traders have suggested there is limited product coming through, with cuts tending to be smaller and inconsistent.
The UK wholesale trade is looking for uniformity for steak cuts in relation to size and marbling and thus appreciates and expects cattle to come through in similar weight brackets and skewed to traditional breeds of Hereford and Angus, with farm assurance demanded by virtually all buyers.
Looking at the summer months ahead, the wholesale trade is predicted to show little pickup, which aligns to seasonal trends as summer months tend to be quieter for foodservice operators while there are increased stocks available.
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