M&A activity in the restaurants, bars and casual dining sector remained strong in 2015 and into 2016, with 17 deals recorded in Q1 alone. Our sector update reveals why business is booming…
Our latest ‘Come dine with us’ report reveals an ongoing appetite from both trade and private equity (PE) buyers in a sector that remains cash generative, resilient and buoyed by consumer confidence.
There are a number of market trends in the eating out sector, ranging from world cuisines through to steaks, burgers and smokehouses, and from health and wellbeing through to ‘premiumisation’ (the move towards expensive premium products) and indulgence. Some of the hottest trends include:
The UK is experiencing an explosion in the number of pan-Asian restaurants, with Horizons, a foodservice market trends and data company, reporting a figure of more than 4,000 Chinese, Thai and Japanese restaurants in the UK – an 18% rise in the past five years.
While the coffee sector remains dominated by the large established players (Starbucks, Costa, Caffè Nero et al), the artisan coffee shop market continues to grow strongly, driven by a more discerning coffee drinker who is prepared to pay a premium for a high quality, freshly roasted coffee.
Blenders, extractors, spiralisers, superfoods and all things 'coconut' seem to have been flying off the shelves over the past 18 months. Healthy eating trends are also being promoted by nutrition coaches and health bloggers, such as the Hemsley sisters, Ella Woodward, Amelia Freer, Joe Wicks and Madeleine Shaw, fuelling a growing consumer demand for healthy, nutritious food when eating out.
The popularity of the sharing concept continues to thrive but an alternative trend is that of the single dish. There has been a proliferation in recent years of chains with a highly streamlined offering, with the clue often in the name, for example, Cereal Killer Café, Pieminister and Burger & Lobster.
Business booming in the regions
Will Baxter, head of restaurants, bars and casual dining at Grant Thornton, said: “2015 proved a strong year for M&A activity with significant interest from the private equity sector. 2016 has seen a robust start, and although it has not matched the explosive growth seen in early 2015, there is a healthy level of appetite already displayed in the first quarter, particularly from casual dining brands operating outside of London. All eyes are on potential deals for Busaba Eathai and New World Trading Company, as well as Tesco’s potential sale of its Giraffe restaurant chain.
“The huge growth in the number of openings in 2015 has created a heightened environment of over-supply and intense competition, particularly as consumers are becoming increasingly more discerning of their options. Rising living costs in London are also starting to drive commuters out of the city, leading to an increased interest from brands in relocating to less expensive areas. A booming restaurant and bar trade is visible outside of London, with Birmingham, Leeds, Bristol, Manchester and Glasgow leading the way.”
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