Recent research has shown that Average Transaction Values (ATV) in the food and beverage industry have increased at a rate lower than inflation in the last two years.
Research carried out by CACI between September 2021 and June 2023 demonstrates that various subcategories within the F&B sector, such as cafes, delivery services, Quick Service Restaurants (QSRs), and dining establishments, have all experienced a rise in ATV. The sole exception to this trend was observed in the pubs and bars sector, which saw a decline of 3% in ATV.
Additionally, data from CACI's Brand Dimensions research indicates that the average expenditure growth across all sectors for the given period stood at 12%. In contrast, the average inflation increase over the past two years reached 16%. These findings suggest that brands have been actively striving to maintain competitive pricing.
The most substantial surge was observed in food delivery services, where ATVs experienced an 18% upturn. UberEats led the way, achieving the highest growth with a 24% increase in ATV. However, CACI notes that Deliveroo consistently maintains a higher ATV throughout the period, exceeding UberEats by an average of £4.50, and has witnessed a 12% increase in ATV.
Paul Langston, Partner at CACI, said:
"Following ATV across the F&B sector provides a great insight into the way that certain brands, and indeed industries, are changing their offer.
This is of course tempered by inflation in the past two years, which averaged around 16% across that period of time, so an ATV rise isn't simply an indication of success, but comparing peers and competitors allows us to draw some really interesting conclusions.
The average spend rise across all of those brands sits at around 12%, which could indicate a sector-wide effort to drive down costs to a point where price rises can be kept below inflation, keeping their proposition as attractive as possible."
Surges in Quick Service Restaurants (QSR)
QSRs have experienced robust performance since September 2021, witnessing a notable 14% increase in average ATV. The primary driving force behind this growth has been Pret A Manger, which has seen an increase of 28% in their ATV since September 2021. Following closely behind are KFC and McDonald's, with respective increases of 21% and 20%.
According to Langston, it is suggested that KFC's robust ATV increase over the past couple of years can be attributed to the rising costs of chicken production. In terms of ATV growth, Pret surpasses all others, benefiting from the increasing return to the office and the inclination to spend while being there.
When examining the performance of individual brands during this timeframe, the most substantial gains in ATV were observed at sushi group YO!, which soared by 50%, and Black Sheep Coffee, which experienced a 36% increase.
In the restaurant sector, Dishoom, Franco Manca, and Giggling Squid have all witnessed significant boosts in ATV. Conversely, the most notable declines in ATV were recorded at Gourmet Burger Kitchen, Hotel Chocolat, and Brewdog, where figures dipped by 14%, 9%, and 9%, respectively.
Price Hikes affecting the Least Affluent
Analysing the ATV trends across various user groups within the F&B sector since September 2021, all sectors experienced an increase. Notably, the least financially well-off groups, as categorised by CACI under the labels 'struggling estates' and 'difficult circumstances,' observed the most substantial growth, reaching 10%.
In alignment with the overarching patterns, the 'difficult circumstances' category exhibited the most significant surge, particularly in food delivery services, where ATV surged by 19%, moving from £18.12 to £21.69. It is however important to note that this remained among the lower ATV figures when compared to other segments in June 2023. The 'lavish lifestyles' consumer group, in contrast, recorded the highest ATV at £30.10.
"Taking into account customer demographics too - using our population segmentation tool Acorn - shows that the least affluent groups are the ones that have put up with the biggest ATV increase.
One of these groups, 'difficult circumstances', saw an increase in Food Delivery Services ATV of 19%, but the £22 they now pay per transaction is still amongst the lowest across all Acorn groups."
When the focus is narrowed to a year-on-year comparison, specifically comparing Q2 2022 to Q2 2023, it is possible to identify consistent trends. In this period, both QSRs and food delivery services continued to show significant increases in ATV, each experiencing a 10% rise.
Notably, KFC and McDonald's demonstrated robust performance during Q2 2023. This can likely be attributed to the confluence of escalating costs, which has increased the demand for these restaurants, along with potential price adjustments from these brands.
According to CACI, a significant majority of operators recorded their peak ATV either in December 2022 or April 2023. This suggests a heightened willingness to spend during the festive season and the Easter holidays.
Paul Langston also commented:
"The former you would expect, as a time of the year when customers want to spend more lavishly if they can. The April uplift likely reflects multiple operators using the start of the financial year as a milestone to pass on price increases.
However, since then 86% of F&B brands have seen a slight reduction in ATV, implying many customers have responded to that by trading down.
How this tracks in the coming months will be fascinating, especially in the context of a rapidly changing national picture in finances, with rising interest rates running alongside cooling inflation and the upcoming modest energy price reduction."
CACI's Brand Dimension analysis encompasses over £4 billion of debit card expenditures, encompassing 300 identifiable brands. Among these brands, over 50 operate within the hospitality sector, including cafes, delivery services, pubs, bars, QSRs, and traditional restaurants.