Darwinian forces at work across the UK casual dining sector

Hospitality Industry Insight

25th July 2017

By richard


‘It is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is most adaptable’ to change.’

This wisdom attributed to Charles Darwin feels highly relevant as we live through a period of rapid market evolution. In the next 2 years, we will witness the emergence of strong new concepts and the demise of some weaker brands. How do brand leaders successfully identify and respond to the market challenges and opportunities ahead?


There are some immediate challenges of consumer demand uncertainty and multiple cost challenges that the market is already responding to. There is an emerging new political landscape to monitor, both in Brexit UK and overseas. And beyond this, what are some of the key market themes that require brand evolution?

Frequent brand updates and change is becoming a consumer habit. Look at their behaviour in other sectors. On average consumers change their mobile phones in the UK every 2 years. PCP finance means that car purchases are often on a 2-3-year replacement cycle. Affordable clothing brands have long enabled consumers to purchase ‘disposable’ fashion wear. How do restaurant and bar brands satisfy the demands for change and evolution of such a change expectant modern consumer?

Recently the supply of new concepts has out-performed consumer growth – so brand growth is dependent on share steal from other operations.

One of the strongest examples of share steal is with the emergence of the fast-casual market. The brands in this segment are providing their guests with a faster service experience (with a focus on enabling technology) and a menu emphasis on freshness and quality. These are important development priorities for all sectors of our market – and the fast-casual brands are additionally offering their guests comparatively low prices and a modern invested brand image and ambience.

Disruptive technology is changing consumer’s behaviour. The impact on the retail shopping sector by Amazon and on line shopping is clearly established. The hotel sector is now responding to the impact of Air BNB. The taxi market is responding to the emergence of Uber. In our sector, we are currently dealing with the disruption of Deliveroo and other delivery aggregators. Whilst low margin, some brands are now achieving over 10% of store sales to delivery. Setting the offer up to be incremental to the core offer is a current industry challenge, then what is the next technology disruption to respond to? And this is beyond current guest expectations that a brands technology platform will provide the level of service speed, responsiveness and engagement that they seek.

New location opportunities are creating excess capacity in the market. Retail landlords are investing in the regeneration of the high street and the development of new shopping malls. Their rightful emphasis is on the introduction of strong casual dining brands to both generate new footfall and to enhance the retail experience of a diminishing need for ‘bricks and mortar’ shopping. But the landlords hunger to maximise the % of sites allocated to food and beverage brands is creating instances of excess expansion of new dining locations – compromising the sales and returns for both the new brand entrants – as well as the inevitable share steal from existing established operations.

Fresh cooking is becoming increasingly important, especially to younger adults. Upgrading ingredient quality and traceability, responding to the needs and pressures for healthier recipes, enhancing the visibility of fresh cooked to order preparation. These trends are now shifting from the niche to the mainstream.

To quote philosophy, change is the only constant in life. Brands need to develop the ability for day to day evolution.

Panera Bread in the US is a great example of successful market adaption – it has been an analyst pick in recent years and is now being purchased for $7.5bn (equivalent to c$3.75m per store). The themes of their recent business strategy – a focus on digital, loyalty, wellness and new growth formats. Their recent investment of over $42m in technology to speed up the order process seems to be generating a strong return!

But the challenge of many established scale brands is their diseconomies of scale when it comes to nimble evolution.  Larger organisations can inhibit the ability to evolve. Investment decisions become so much more expensive with scale. Organisation structures of large brands naturally evolve from a more entrepreneurial style to a more considered and risk adverse approach. Brand investors want to see a strong business case and trial evidence before supporting major change. And it’s simply harder to achieve transformation in larger brands where the layers of structure and long established practices and behaviours of the teams are harder to effectively change.

The ever-increasing need is for all brands to have clear and bold stand out. Good brands are relevant, distinctive and differentiated – it’s clear in their brand promise what they stand for. Too many casual dining brands struggle to be that single minded – and appear compromised in comparison to the more single minded clarity of their emerging fast casual competitors. A single-minded brand promise helps a brand to continually evolve the customer experience – the product offer, service personality, ambience and design, and brand communication.

Some brands therefore rely too readily on price promotion discount (or RPI inflation) to influence consumer behaviour and generate short term sales growth. Well considered price and promotional offers should be applauded if effective in growing market share and store economics. But it’s not an alternative to resolving the more challenging need to enhance the guest experience in respond to the evolving market needs and competition.

So back to the principals of Darwin. Who are the brands most at risk of natural de-selection? The Morar BRS survey is a fabulous barometer of key market metrics. Within their analysis is a ranking of brand desirability versus experience affordability. It shows that many brands are positively rated by their guests as being worth their price (in both the budget market with brands like Wetherspoon and the premium market with brands like Miller & Carter). It shows that modern casual brands like Wagamama, Nando’s and Franca Manco also appear strongly positioned. But there are several longer established brands that do not so easily justify the price charged for the experience they offer – with many of them already deep into strategic review and transformation by new management teams.

With confidence though we can assume that despite short term economic challenges, the demand for eating out will remain strong and create outstanding opportunity for the successful brands. The challenge for each brand is to effectively engineer ongoing brand evolution and relevance into their ongoing evolution – and use their brand advantage to ensure long term Darwinian survival.