1. In-store Catering
November 2010

2. Issues in the Market
How has the economic climate impacted on consumers eating out habits?
What are the main factors driving dining in in-store cafes/restaurants?
To what extent do consumers want to see healthy eating options on menus?
What role is catering having on stores overall strategy and development?
© 2010 Mintel International Group. All rights reserved. Confidential to Mintel.

3. Summary
Increasing emphasis is being placed on in-store catering, both as a revenue stream and as a footfall driver.
For sectors such as bookstore retailing, music stores and garden centres this trend is particularly evident as operators attempt to become destination leisure venues in order to counteract competition from online and non-traditional retailers.
However, the in-store catering market also has to battle a number of potential negative trends eg the economic climate has made consumers more selective about the meal occasions they choose to eat out for, which doesn’t bode well for in-store catering when it is often just seen as a refuelling exercise.
© 2010 Mintel International Group. All rights reserved. Confidential to Mintel.

4. Department Stores & Variety Stores
The retail sector has held up relatively well considering the economic downturn of recent years. However, 2011 looks set to be an increasingly tough year for retailers.
The investment in modernising in-store catering options in this area in recent years should help buoy the market during this uncertain time but there is still more that could be done to encourage consumers to spend in this area.
Tasting opportunities near the front of the store, both to act as general advertising for the restaurants which are often in out-of-the way locations but also to promote any focus on seasonal produce and regularly changing menus.
© 2010 Mintel International Group. All rights reserved. Confidential to Mintel.

5. Supermarkets/ Grocery Retailers
In recent years, supermarkets have been focused on making it easier for customers to shop at their stores by expanding formats such as convenience stores and now have an increased focus on homewares and clothing, particularly online. This also helps these operators to gain a greater share of customer’s expenditure.
In-store catering doesn’t appear to have been a central concern for most players in this sector recently, as most seem to have just tweaked the ingredients used in its established menus in order to keep up with basic healthy eating trends.
© 2010 Mintel International Group. All rights reserved. Confidential to Mintel.

6. Bookstores
Traditional high street booksellers have faced increasingly tough market conditions as cheaper online and/or non-traditional retailers continue to encroach on their territory. The demise of Borders in 2009 stands as a stark illustration of the difficulties the booksellers face.
However, this has meant the role of in-store catering has increased in recent years as these operators look to become destination leisure venues in their own right in order to carve out a position in the shifting market place. Waterstone’s is a prime example of this trend, giving over more retail space to its modernised 5th View restaurant offer.
© 2010 Mintel International Group. All rights reserved. Confidential to Mintel.

7. Garden Centres & DIY Stores
In a similar vein to bookshops and music stores, garden centres have become increasingly focused on becoming destination leisure venues in recent years in order to combat negative market conditions. Catering has been a central element of this strategy.
‘Connectivity’ has been noted as a key strategy in this market: tying together produce from local producers through on-site farm shops or bakeries/deli’s etc as well as having a café/restaurant offer helps to convey a sense of quality, value for money and commitment to food issues.
Although DIY stores such as B&Q do have a catering offer in a number of outlets, these compete with other onsite outlets such as catering vans in the car parks outside of these stores.
© 2010 Mintel International Group. All rights reserved. Confidential to Mintel.

8. Furniture Stores
As a big ticket purchase, furniture sales have been dramatically affected by the economic downturn and the now uncertain economic environment in the wake of the recession.
However, Ikea’s focus on providing a tiered pricing structure (eg low cost ‘value’ products, a core offer and more premium higher priced products) in terms of its furniture product offer has meant that it has been well placed to appeal to changing consumer purchasing behaviours.
Ikea’s multi-format catering offer (from sit-down restaurants at the entrance to fast food offers at the exits) also helps the company remain responsive to consumers multiple meal occasions, particularly with its value positioning.
© 2010 Mintel International Group. All rights reserved. Confidential to Mintel.

9. In-store Catering - Contract/Retail Caterers
The BHA reports that the number of contract catering outlets decreased overall in 2009, with local authorities and Business & Industry sectors experiencing the largest contractions in market size.
In contrast, the leisure sector of the contract catering market has continued to grow in recent years.
Café Zest in M&S outlets and 5th & 2nd View restaurants in Waterstone’s have been two relatively high profile concept developments from contract caterers in recent years.
© 2010 Mintel International Group. All rights reserved. Confidential to Mintel.

10. Competitive Context
Leisure and experience take precedence for consumers, with eating out continuing to top the bill of consumers spending priorities.
These two factors are also the key components for retailers to demonstrate to consumers the benefits of shopping in-store rather than online.
The recession and volatile economic climate has forced the eating out market to contract marginally in 2009 with slow growth returning in The fear is that a ‘retail recession’, which the country has thus far avoided, may materialise in 2011.

11. Strengths & Weaknesses
Eating out continues to be consumers top spending priority.
Catering is increasingly invaluable as a revenue source and footfall driver for sectors looking to combat wider market trends such as increasing competition and waning demand.
Much investment has been funnelled into the market in recent years not only for stores such as HMV looking to become destination venues, but also for traditional high street retailers such as John Lewis, which are looking to create physical stores as inspiration points to differentiate them from their online selling channels.
The retail market has proved remarkably resilient during the economic downturn and may yet defy predictions of a downturn in 2011.
Weaknesses
The economic downturn has affected many markets eg the decline in big ticket sales has impacted on furniture retailers.
Longer term market conditions have also taken their toll, eg bookstores/music retailers face increasing competition from both non-traditional high street and online retailers as well having to adapt to growing trends such as music downloads and e-readers.
Half of consumers have cut back on eating out in the last year, with this number growing amongst those around family age (25-34 years old).
The majority of in-store catering users rank it as a refuelling exercise which means it is a more likely area for diners to cut back on than other meal occasions which they see more as a leisure experience.
Competition is fierce in the eating out market generally. For example, as well as competing with the coffee shops market, in-store catering operators are also up against are growing number of non-tradition coffee shop offers such as offered by fast food giant MacDonald’s and pub operator JD Wetherspoons.

12. Market size and forecast of the UK in-store catering market, 2005-15
Market Size & Forecast
Market size and forecast of the UK in-store catering market,
Source: Mintel
Retail growth was erratic in 2009 but has been consistently strong in 2010, showing remarkable resilience considering current economic conditions. However there remains a potential for a retail recession in 2011.
After a period of investment and modernisation some operators are achieving an increase in like-for-like sales for their catering outlets.

13. Market Share
In terms of outlet numbers, the in-store market is dominated by the leading grocery operators who together operate over 1,000 instore catering venues.
Leading grocer Tesco, is also the leading operator of in-store catering outlets with 432 cafes/restaurants.
However, in-store catering is more of an issue for some retailers than others, forming an important part of the strategic development of a number of operators who are looking to drive footfall and create more of an all round leisure experience.

14. In-store catering outlets visited
In-store catering outlets visited, September 2010
Base: 2,000 internet users aged 16+
Source: GMI/Mintel
Garden centres/DIY stores are popular venues for in-store catering which reflects the focus of these sectors, especially gardening centres, which have been repositioned as leisure venues in recent years in part as a reaction to the growth of the online sector.
© 2010 Mintel International Group. All rights reserved. Confidential to Mintel.

15. Reasons For Eating At In-Store Restaurants
Reasons for eating in in-store restaurants, rank1, September 2010
Base: 1,478 internet users aged 16+ who have
bought food or drink from in-store restaurants
in the last 12 months
Source: GMI/Mintel
In-store catering is primarily seen as a refuelling option which would suggest that the focus should be on fast service formats, potentially with an emphasis on snacking options.
© 2010 Mintel International Group. All rights reserved. Confidential to Mintel.

16. Attitudes Towards Eating Out
Attitudes toward eating out, September 2010
Base: 2,000 internet users aged 16+
Source: GMI/Mintel
Price promotions are not the primary motivator of why consumers eat out, however, it does affect their purchasing decisions in terms of what they choose to eat and where they choose to eat it.
© 2010 Mintel International Group. All rights reserved. Confidential to Mintel.

17. In-Store Catering Targeting Opportunities
Spontaneous Indulgers
(25% of in-store catering users)
Eye catching dishes which grab attention are the focus for this group, not issues such as health or high end products.
Biased towards those aged 25-34, D, single, children aged 0-4
Apathetic
(32% of in-store catering users)
Shows little interest in in-store catering
Biased towards men, aged 55+, retired/not working, C1 & E
Health-Conscious Enthusiasts
(19% of in-store catering users)
The most enthusiastic about in-store catering but demanding of health-orientated dishes
Biased towards women, aged 16-24, employed part-time/ full-time education, single
Adventurous Refuelers
(24% of in-store catering users)
Although these older consumers see in-store cafes merely as pit stops, they could be encouraged to increase their dwell time through more adventurous and unique dishes
Biased towards women, aged 55+, retired, E, no children in household

18. Helena Spicer Your contact Senior Analyst mintel.com
mintel.com