• Will Hawkley, Author |
8 min read

A flavour of the market

The UK has experienced huge growth in takeaway and delivery demand. As the pandemic took hold, it seemed the British public couldn’t get enough takeout (or deliver-in). But will this boom stay?

During the pandemic, ordering food in - often through one of the ubiquitous delivery apps on our phones such as Deliveroo, JustEat or Uber Eats (to name but a few) - became a part of everyday living.

Now, with the cost-of-living crisis tightening its grip across the UK, will takeout be ruled out?

Although more broadly consumers are looking to cut back on non-essential spend in 2023 – and eating out and takeaways fall into this category – our research shows that public appetite for a fast and tasty meal is still high, with nearly a third (31%) of consumers saying they have at least one takeaway a week. This rises to a significant 58% in London, while nearly four in ten (38%) of 18-24 year olds nationally devour a takeaway at least 2-3 times a week. Family treats also appear to be firmly on the menu, with 35-54 year olds typically spending the most when they order, approximately £60+, making this market a strong opportunity for any takeaway operator.

Our research has helped to uncover the ordering habits of 4,000 UK consumers and assess regional variations, which are largely driven by age and access to services.

Our conclusion is that whilst the takeaway market may experience something of a squeeze due to cost-of-living pressures, it is important to highlight that half of consumers expect to order the same amount of takeaway over the coming year. It will remain a robust market with plenty of enduring appetite.

“Leaner times in the takeaway market will require fresh approaches to keep on tempting consumers. Winning propositions will combine quality and value with convenience and choice.”  Will Hawkley, Global Head of Leisure and Hospitality, KPMG in the UK

So, let’s delve into what’s on the ‘specials board’ for the resourceful takeaway and delivery sector in 2023.

Loyalty, pricing and ‘KYC’ will be key

In our recent consumer polling, nearly one in five (18%) said they would sign-up to retailer loyalty schemes. Organisations need to focus their efforts on building loyalty to receive repeat orders from customers, as it’s harder to continuously attract one-off business.  

This is where food delivery apps enjoy success, as they are already widely embraced. Our research shows that discounts and offers are the third most important criteria (33%) in their use. These could help woo customers, especially in cost-conscious times – but there is a risk that savvy consumers will use an app when there’s an attractive offer and then simply switch back to their familiar outlets, which makes building sustainable market share difficult. 

Overall, the signs are that in fact many consumers are traditionalist when it comes to their food and stick to what they know:

  • Four in ten consumers (41%) have just one or two ‘local hero’ restaurants they repeatedly order from.
  • Younger consumers are more adventurous, with nearly six in ten (59%) of 18-24 year olds having up to five regular favourites.
  • One in seven (15%) stick to known favourites because they have special dietary requirements – and this rises to 26% in London.

Pricing is clearly another key criterion. If the cost-of-living crisis continues as expected during 2023, a sharp pricing strategy with a sprinkling of tempting headline offers is likely to be important for all operators.

Another key factor is quite simply to know what makes your customer tick. Not all takeaway and delivery lovers are the same. The young order more than older generations; urbanites partake more frequently than those in rural locations; 35-54 year olds tend to spend significantly more than the average; men order more often than women (35% vs 26% at least once a week). It follows therefore that every takeaway and delivery operator, and every app, must have a clear strategy around which parts of the market are their priority. Through constant testing and analysis they need to build a detailed picture of what offers work, what items are hot and what leaves their target customers cold.

Getting channel strategy right

Another key piece of the puzzle is operators’ channel strategies. More simply put, how are they going to attract buyers’ interest and orders, and then get food into their mouths? One of the big answers to this in recent years, of course, is… delivery.

A decade or so ago, ‘takeaway’ was literally that: the vast majority of business was done over the counter as consumers physically came in (or drove through) and took their orders away. But with delivery reaching new heights during Covid lockdowns, consumers still love its ease and convenience today in less ‘unprecedented times’.

Our research finds that use of apps equals telephone calls for order method (50% of consumers have used each one in the past 12 months) and exceeds over the counter (43%). Time pressured 25-34 year olds have clearly embraced apps, with 65% using them compared to only 41% using calls. Regionally, the North West (54%) pips London and Scotland (53%) for digital ordering, with the lowest penetration seen in Wales (39%).

Ordering through an outlet’s own website or app has also become widely adopted (35-40%). Many restaurants/takeaways that were slow to partner or enlist with one of the major apps during Covid have built their own, with the support of a new wave of businesses such as BookedIT, OrderYoYo or Qikserve. Some have ‘doubled down’, with both their own app and a listing on a delivery platforms.

We see the growth of own-app as a trend for the future, presenting continuing and increasing opportunities for app solution businesses.

All of this leaves operators with a number of questions to grapple with:

  • Are you offering the right channel mix, with appropriate delivery options – and, if enlisting on a delivery app, are you going with the right one(s)?
  • How is pricing and product architecture adapted to offset delivery platform commissions? Are takeaway and delivery sales accretive or cannibalistic, and how does this vary by geography and day-part?
  • What is the right operational infrastructure? What is the right mix between existing kitchens, dark kitchens and central kitchens? What is the impact on staffing? And are EPOS and ERP systems fit for purposing in capturing decision-useful data?
  • More broadly, what does all this mean to the customer? Do they have the right options in front of them and are these enhancing their experience of your brand?

Rapid delivery finds a new audience

Like food delivery, rapid grocery delivery or quick commerce has proven its popularity beyond lockdowns, with 24% of consumers that we surveyed saying they have used rapid delivery services for groceries – and this rises to 41% in London. Once again, we see some significant regional variations – in areas such as the South West and East of England it drops to only 13% where there is a lack of availability in these areas - and also age-related differences, with these services most popular with young consumers (47% of 18-24 year olds have used) and then tailing away progressively through the age ranges (only 17% of over 64s have tried it).

What are the right business and partnership models for it to become financially sustainable and scalable over the long term?

Our analysis predicts three possible growth scenarios for the quick commerce sector in the UK from today to 2030 despite a tricky global economy:

  • Base case scenario: a flattening as the market consolidates and natural saturation is achieved. That would still mean a tripling of growth by 2030, from £1.7billion today to £4.4billion in sales.
  • Upside scenario: growth to £6.1billion by 2030, which could be 1-2 years longer if the cost-of-living crisis is sustained beyond mid-2023. This will be achieved through successful partnership strategies and effective marketing to raise consumer awareness and willingness to try, replicating the recent growth seen in the e-commerce channel.
  • Downside scenario: the market growth slows to only reach £2.7billion. In this scenario, growth is slowed by the cost-of-living crisis and inflation. As providers struggle to make the model profitable, the market would remain focused on Tier 1, typically large cities (e.g. London, Berlin, Istanbul, Singapore, New York), with a balancing act of promotional measures and pricing elasticity needed to continue to tempt shoppers.

However you cut it, quick commerce is set to grow – the only questions being by how much, and with how much consolidation amongst the main players.

We see potential for quick commerce to expand further in relation to food consumption, especially with 40% of consumers planning to cook more from scratch at home in order to control costs – thereby fuelling their need for ingredients. Our research found continued interest in rapid delivery of a wide range of other items beyond groceries – such as butchery/local meat (37%), medicines (36%), farm vegetables (35%) and baked goods (32%). In London, there’s even demand for fashion and clothing (37%). In more rural areas – Wales, Scotland and South West – locally sourced goods are particularly popular.

So, another ingredient to throw into the takeaway and food delivery mix is certainly rapid delivery players.

Key ‘takeaways’

The bumper conditions seen through Covid and on into 2022 may be moderating for the takeaway and food delivery sector as consumers tighten their belts. However, given the size of the UK market, there will continue to be victors taking a generous slice.

We see a number of winning combinations:

  • Value, well-targeted promotional offers and quality of product will be more important than ever to persuade UK consumers to part with their money.
  • Convenience, ease of ordering and fast, reliable delivery will also be key.
  • There is an opportunity for delivery platforms and grocers to leverage increased demand for home cooking ingredients and create significant sub-markets in different parts of the UK.

Although there are undoubtedly challenges, it’s not all bad news for the sector, with new possibilities opening up and plenty still to get your teeth stuck into.