Developments in foodservice - Presentation for Food from Denmark-

1. Developments in foodservice- Presentation for Food from Denmark- 22 September 2010

2. Horizons: Foodservice Architects • We help our clients build successful businesses in foodservice • 100% focused on foodservice and hospitality in UK, Europe, USA, UAE • We work for: • Investors • Operators • Distributors • Manufacturers

4. Menurama 6-monthly menu collection and analysis 400 menus 100 chains 4 regions 36 menu characteristics 10,000 data points Trends since 2003 Used for: Strategic and tactical review of customer offers and prices Identifying emerging trends

5. QuickBite • Qualitative survey of consumers’ eating out behaviour • By channel and outlet type • 4 times a year • 1,000 adults aged 16+ interviewed • Questions • How often - in the last 2 weeks - have you eaten food away from home • In which type of establishment did you obtain the last meal away from home? • How much did your own meal cost? • In the year ahead, are you likely to eat our more, less, or about the same as you did last year? • Plus: special questions

6. Foodservice and Retail

7. Retail and Foodservice –Feel the difference Retail Ordered Systems-driven The customer has to work Foodservice People centric “Anything else to make your meal special?” Entrepreneurial

8. Foodservice plus Retail … Total Food and Drink: £140 billion • Foodservice has given the retail world: • Pizza • Indian food • Chinese food • Burgers • Oven-ready chips • Ice cream • Coffee 30% Foodservice Retail Institutions >> Source: Horizons with IGD

9. Overview of foodservice in the UK

10. Restaurants Quick Service Pubs Hotels Leisure Staff Catering Health Care Education Services Contract Caterers Travel Operating sectors

11. Caterers spend £41 Billion each year on ... Equal shares: Food and drink 1/3 Note: Food alone 1/4 Labour 1/3 Other expenditure 1/3 Food and drink Other Labour

12. Foodservice and “Near foodservice” • Mainstream foodservice • Popular foodservice • Hotels/leisure • Institutional • Vending • Blurring: foodservice/retail • On the go • Retailers’ home delivery • Retail “eating out/eating in” • What it’s not • Accommodation, travel, gambling • Retail

13. Meals served by UK foodservice Meals served 2009: Total: 8 billion Source: Horizons

14. Sales value of UK foodservice Total Food and Beverage sales 2009: £41 billion Source: Horizons

15. Top 10 brands Restaurants QSR Greggs Subway McDonald's Costa Coffee KFC Starbucks Burger King Domino's Pizza Caffè Nero Ben & Jerry's • Pizza Hut • Pizza Express • Nando's • Frankie & Benny's • Little Chef • Prezzo • ASK • Prezzo • Café Rouge • Zizzi

16. Carluccio’s Sales: +8.0% Sector: -1.1% Maximise revenue – cover costs throughout the day JD Wetherspoon Sales: +1.2% Sector: -1.5% Maximise customer spend on profitable lines 3. Domino’s Sales: +17.5% Sector: +2.1% Increase sales by being available everywhere, all the time The lessons? It’s possible to grow in the midst of a recession Be available Offer what the customer wants Who have outperformed their sector? Source: Market Dynamics Toolbox, Key Brands and Accounts

17. How big is foodservice in the UK? • Food, drink sales to consumers £42.0 Bn • Food sales £31.2 Bn • Drink sales – alcoholic & soft drinks £10.8 Bn • Share of Retail + Foodservice 30% • Food sales to operators £10.1 Bn • Food ex-factory shipments £7.1 Bn • Per year, it serves 8.3 Bn meals • Number of outlets 259,000

18. Pricing

19. Dish prices Starters, Desserts Prices go up Consumers stay away Source: Menurama

20. Price of a 3 course meal Widening difference Source: Menurama

21. Promotions Meal Deals 21% Meal Deals 36%

22. What would you have done if you hadn’t used a discount voucher? • 10% of adults used a voucher in last 2 weeks • Especially in pizza restaurants and take aways Source: QuickBite 1,000 adults July 2010

23. Inflation: The Margin Squeeze

24. Drivers – consumer issues • More change • Fickle consumers – more choice • Changes in lifestyle • Demand for “comfort” • More “on the go” • More eating out – at expense of at home • Health/wellness vs obesity/heart disease • Price • Meeting (lower) price expectations

25. Food and Marketing

26. Restaurants Pizza Beef/cheeseburger Steak Chicken pasta Chicken breast Pubs Beef/cheeseburger Steak Fish & chips Chicken breast Chicken burger Top 5 dishesSource: Menurama Winter 2009/2010 • QSR (S’wich/coffee shops) • Sandwich • Muffin • Panini • Baguette • Croissant • Hotels • Steak • Beef/cheeseburger • Fish & chips • Pizza • Grilled salmon

27. Meeting changing ethical trends • 2008 • Dolphin-friendly • Organic • Vegetarian • 2010 • Fairtrade • Farm assured • Five-a-day • Local (grown or sourced) • Line-caught fish • Rustic • Slow cooked / roasted • Sustainable 2009 • Fairtrade • Farm assured • Local • Organic • Sustainable Fish and Chips – at Old Orleans Dixie Fish and Chips: Battered cod fillets served with fries, lemon and a side of creamy Trinity dressing Hand Battered Fish and Chips Fillets of hand battered cod from sustainable sources served with peas, fries a side of our own creamy Trinity dressing Hand Battered Fish and Chips Fillets of battered Pacific cod from sustainable sources, served with peas, fries, lemon and a side of our own Trinity dip Source: Menurama

28. Quality Assurance / Responsible Production • Consumers increasingly demanding about their food • Demand fuelled by celebrity chefs, press, documentaries • Sales of premium foods suffered in the recession • Top terms on menus - January 2010: • “Free range” (eggs, chicken, sausages) • “Organic” (meat, fish, vegetables, cheese, bread, ice cream, biscuits, baby food) • “Home made” (meat, fish, soup, ‘English’ dishes: crumble, cottage pie, roast Sunday lunch) • “Farm assured” (chicken, meat) • “Corn fed” (chicken, eggs) • RSPCA “Freedom Food” (chicken): on menus since 2006 • “Sustainable” (fish, seafood) • “Outdoor reared”, “Outdoor bred” (meat) • “Fairtrade” (coffee): on menus since 2004 • “Dolphin friendly” (tuna) • “Local”, “Farm fresh” (cheese, meat) • “Red Tractor” (meat): on menus since 2005

29. Quality Assurance / Responsible Production “Other” includes Red Tractor, hand selected, hormone free, traceable etc Source: Menurama

30. Direct engagement with and feedback from consumers • Targeted channel for operators to spread promotional messages Giraffe Scream pubs (Mitchells & Butlers) J D Wetherspoon’s Curry Club Social Networking • Resulting in increased brand loyalty

31. Impact of the internet: fixed and mobile • Pre-dining research • at outlet, dish and nutritional level • 80% have online menus, 66% downloadable menus Nando’s Source: Menurama

32. Structure of the Market

33. A 25 year trend Long term trends shown in terms of volume (Meals) rather than purchases (£) because inflation can distort the picture +0.8% pa growth in numbers of meals served Source: Horizons

34. Numbers of meals Increase in Commercial sector: Restaurants QSR Pubs Hotels Leisure Decline in Non -Commercial sector: Staff catering Health care Education Services Source: Horizons

35. During 2010 • People continue to eat out • But spend less • Meal deals help • Operators facing a squeeze on their margins • Inflation helped them get out over it in early 2009 • 2010 • January snow – down dramatically • From mid January – market picked up slowly • Spring – generally better than expected but not great • Summer - disappointing

36. Beyond 2010 • Next few months - continuing modest growth • But stones in the road: • Impact of summer budget • More taxes • Cost sector cutbacks • Less to spend • Inflation • Economic fragility • Rising unemployment • Leading to: • Market uncertainty • Possible decline • Non-commercial sector – will decline

37. Distribution to the foodservice sector

38. Temperature profile of food purchases Total Food purchases 2009: Total £10.1 billion Source: Horizons

39. Distribution channels for food purchases Total Food purchases 2009: Total £10.1 billion Source: Horizons

40. The major players in food distribution • Fragmented • Top 2 have 36% • The next 5 have 17% • But • Sector/temperature concentration £10.1 Billion Source: Horizons