The EuropeanFoodservice Market

Main players, Structures, Dynamics and Trends

Peter Backman

CIR . Prague . 26 January 2006

Eating out - Europe’s role

USAEuropeRest of the World

Global foodservice:€1.5 trillion

€331 billionSource: Horizons

The Top 10 Foodservice Operators in Europe 2004

McDonald's €11.4 bnCompass €9.0 bnSodexho Alliance €5.3 bnElior €2.5 bnMitchells & Butlers €2.3 bnWhitbread €1.9 bn Burger King €1.8 bn Yum! Brands €1.7 bn Autogrill €1.6 bnAccor €1.5 bn

Source: Horizons/FSE and ME

What is Europe?

• One country?• A family?

• A harmonious family?

• A dysfunctional family?

Common economies

• Growing GDP• Changing power of the state• Employment – Up (a bit)• Unemployment – High but falling• Wide mix of activities• Shift:

• Agriculture > Manufacturing > Services• Opening markets• Competition from China/India

Common demographics?• Populations growing slowly• Greying/growing life

expectancy• Stable fertility rates• More children outside

marriage• Fewer marriages• More divorces• Increasing age at first

marriage• Increasing dependency• Falling rural populations• More households• More migration

> Falling in 17 countries> Women: Spain/France 84;

Turkey/Moldova 72> Below replacement rate> Nordics >55%, Greece/

Cyprus <5%> Denmark up!> Greece/Lithuania down> Nordics >28; Russia/

Belarus/Ukraine/Turkey <23> S Europe falling fastest> Europe wide> Europe wide> Emigration from 9 countries

20 Common consumer issues

1. Increasingly well travelled

2. Highly literate3. More inequality

• Gender• Race• Age

4. Fearful• Terrorism• Avian Flu• Pensions

5. More time6. More money7. Less smoking8. More e-aware

9. More choice10. Increasing

complexity• Age• Gender• Lifestage• Expenditure• Global/local

11. More environmentally concerned

12. More ethical13. More individualistic14. Greater

preparedness to try new things

15. More need for comfort

16. More need to belong17. Healthier eating

• Salt• Sugar• Fat

18. Obesity19. Dieting20. Going organic

You have to understand this

Common foodservice markets

• Increasing corporate activity• Growth of groups• Buying/selling businesses

• Changing styles• Coffee bars• Fast casual• Healthy options• More choice

• Emergence of celebrity chefs

Harmony or dysfunction?

• A bit of both• The lessons?

• Take account of the differences• Take advantage of the similarities

How big is foodservice in Europe?

• It serves 65 Bn meals a year20,600 meals every second!

• It consists of 2,920,00 outlets

• Food, drink sales to consumers €331 Bn€431 per person per year

Source: Horizons

Restaurants, QSR, Drinking Places dominate

Restaurants

QSR

Drinking PlacesHotels

Leisure

Staff Catering

Health Care

EducationServices

Source: Horizons

Huge differences in size

0 25,000 50,000 75,000

Germany

France

UK

Italy

Spain

Netherlands

Belgium

Greece

Sweden

Portugal

Switzerland

Turkey

Poland

Iceland

Estonia

Sales: Euro MillionSource: Horizons

Top 5: 77%

Europe v US

Average Sales/outlet 2004• US €496,220• Europe €113,520• EU 15 €171,920• EU 10 €25,920• RoE €18,110

Average Sales/person 2004• US €1,268• Europe €431• EU 15 €815• EU 10 €100• RoE €48

• Europe lags• But there are levels of

development – EU15+, EU 10, RoE

10 Things standing in the way

1. Finding locations2. Funding

• Banks• Equity• Franchising• Management/contract

3. Labour• Availability• Costs

4. Management skills5. Competition

• Foodservice• Leisure

6. Supply chain• Accessibility• Profitability

7. Supplier support8. Branding is weak9. Lack of focus:• Foodservice +

• Manufacturing• Retailing• Multi-sectoral

10.Few cross-border players

• No. 25• 19 countries• Triple offer• Multiple promise

• Reward• Destination• Family/children

The Top 100 Foodservice

Operators in Europe

What is the Top 100 share?

0%

20%

40%

60%

80%

100%

Turnover Countries

All othersTop100

1717€€68 bn68 bnsalessales

Source: Horizons/FSE and ME

The Top 100 - Rules

• Measures food and beverage sales• Systemwide figures• Categorised by:

• Main business activity• Country of origin

• Reported figures – otherwise estimates• Constant currencies• Beware:

• Comparing apples and pears: many sectors• Strips out:

• Accommodation• Facilities management• UK: Tenanted/leased pubs

Group operators

• Polarisation• Growing importance of groups• Benefits of scale:

• Access to finance• Marketing• Branding• Employment• Purchasing/cost reduction

What sectors?% of Top 100 Sales

Contract CateringQSRPubsTravelRestaurantsHotelsOthers

Source: Horizons/FSE and ME

Sector F&B salesAverage in each sector

0 200 400 600 800 1000 1200 1400

Contract Catering

QSR

Pubs

Travel

Restaurants

Hotels

Others

€ million per group

Source: Horizons/FSE and ME

The fastest growing sectors- 2004 vs. 2003

0

2

4

6

QSR

Restau

rants

Hotels

Pubs

Others

Total

Contra

ct Cate

ring

% c

hang

e

Source: Horizons/FSE and ME

Groups – where do they come from? % of Top 100 Sales

UKUSAFranceGermanyItalySpain10 Others

Source: Horizons/FSE and ME

SalesAverage from each country

0.0

0.5

1.0

1.5

2.0

USA UKFran

ce Italy

Sweden

Belgium

Switzerl

and

German

ySpa

inFinl

and

Greece

Netherl

ands

Norway

Portug

alRus

siaAus

tria€

milli

on

Source: Horizons/FSE and ME

What does this tell us?

• 3 countries have 77% of “group” business• UK

• The most “grouped” European country• Strong in Contract/Restaurants/Pubs

• France• Also strongly “grouped”• Especially in Contract catering

• US is dominant for• High throughput concepts• QSR

How does Europe compare - by sector?

0%

20%

40%

60%

80%

100%

Europe USA

F&B

sal

es OthersContractQSR

Source: Horizons/FSE and ME/Nations Restaurant News

The Top 10 Foodservice Operators: Europe and USA

McDonald‘s €11.4 bnCompass €9.0 bnSodexho €5.3 bnElior €2.5 bnM&B €2.3 bnWhitbread €1.9 bn Burger King €1.8 bnYum! €1.7 bnAutogrill €1.6 bnAccor €1.5 bn

McDonald's $24.4 bnYum! $16.7 bnBurger King $7.9 bnWendy’s $7.9 bnSubway $6.3 bnAramark $5.3 bn Sodexho $5.1 bnCompass $5.1 bnDarden $4.7 bnApplebee’s $3.9 bn

Source: Horizons/FSE and ME/Nation’s Restaurant News

++

Source: Horizons/FSE and ME/Nations Restaurant News

Will Europe follow the US?

• Europe’s structure is different:• US: QSR dominates• Europe: Contract +QSR + other sectors

• The US model works where there are common:Beliefs, expectations

x Languagex Real estate developmentx Property lawx Currency

What’s the potential?

0

400

800

1,200

1,600

Europe USA

€ B

illion

/ €

/ Milli

on

Population MillionsFoodservice Sales/personFoodservice Sales € Billion

Source: Horizons

How can you do it across Europe?

1. Identify and understand your customers2. Get your infrastructure right3. Treat Europe like an adult

• Here’s how some operators get it right –some of the time …

• Developed by Kaye family• Serial concept creators

• 4 stores• Features

• Stylish• Fast casual• Sector top-end spend

• Portuguese from South Africa!

• 116 stores in Europe• 3 countries• Imaginative/high

energy

coffeeheaven• 42 stores• Central Europe• Coffee• Emerging economies

The Subway business• Massive expansion • Totally franchised• 1,056 stores in 24

countries in Europe• 80% in UK and Germany

The Subway offer• Fresh• Fast• Casual• Positioned against

McDonald’s

Cantina Mariachi

Cantina Mariachi• 108 stores• 4 countries• Mexican theme• Clear model:

• Retail parks• Fast• Restaurant• Efficient supply chain

Comess Group• 4 concepts• 160 stores

• “To accomplish great things we must dream as well as act”• Anatole France

• “Action may not always bring happiness … but there is no happiness without action”• Benjamin Disraeli

Thank you for listening to me

How to contact usPeter Backman

Horizons FS Limited313 Regents Park RoadLondon N3 1DPUnited Kingdom

T: 00 44 20 8349 1062F: 00 44 8701 272 219M: 000 44 7785 242809E: peter@horizonsforsuccess.com

www.horizonsforsuccess.com

Horizons services

• Consultancy

• The Key Club – Study Tours and Workshops

• Foodservice Intelligence database

• Survey projects

We help our clients make better decisions

• 30 years experience• 100% focused on foodservice in UK and

Europe• We work for:

• Operators• Distributors• Manufacturers• Financial institutions• Marketing agencies• … and many more

Horizons Database: Features

• Covers foodservice, hospitality• Fully integrated model, consistent definitions• UK and pan-European• 160,000+ statistics• Externally validated methodology and statistics• Base year 2004 plus 2001 to 2009 • Information on over 3,000 operator brands• Distributor information• Market commentaries• Multiple delivery options – spreadsheet, web, hardcopy,

presentation etc

Horizons Database:Definitions – page 1 (of 6)

SECTORSRestaurantsEuropeanBritish/CosmopolitanItalian/SpanishFrenchEthnicChinese/OrientalIndian/PakistaniMediterraneanOtherConceptIn-StoreSpecialist Roadside RestaurantsPub Restaurants

N.B: These are pubs for which food sales account for over 50% oftotal salesPizza/PastaMexican/Tex-Mex/CaribbeanThemedSpecialist Menu/Other.Pubs

N.B: All pubs that are part of a hotel are counted in the hotel sector.Tenanted operators include franchises and leases.

Brewery OwnedTenanted and LeasedManaged BrandedManaged UnbrandedPubco OwnedTenanted and LeasedManaged BrandedManaged UnbrandedOtherFreehouseWine BarNight Club.Leisure

N.B: Leisure parks (such as Warner Village) are excluded from this category. Outlets located on such sites are included in the relevant sector (Restaurants, Quick Service etc).

Quick ServiceFast Food

NB: These are chains where control lies at head office, with over 50 outlets worldwide and which operate at least a sit-in area or a delivery service;

Burger KingDomino’s PizzaKFCPizza HutPret a MangerMcDonald’sWimpy

CafesCoffee Shops

N.B: The coffee shop sector consists of those outlets that serve hot or cold beverages, but no alcohol and that serve viennoiserie, doughnuts, cakes or ice-creams. They may also serve sandwiches, small salads or soups, although serving meals is not their main domain of business. These include tea rooms, action based coffee shops, ice-creams parlours as well as the more traditional coffee shops

Traditional CafesTake AwaysSandwich barsFish & Chips/KebabsChinese/Oriental

N.B: Outlets that have no restaurant section and only operate a take-away/delivery service

Indian/Pakistani:N.B: Outlets that have no restaurant section and only operate a take-away/delivery service

Burger/Pizza/ChickenJacket Potatoes/OthersHotels

N.B: Each site is counted as one outlet even though it might have several foodservice components within it (e.g. a restaurant, a pub and room service). Travel hotels are counted only if they offer some foodservice offering (e.g. room service). Self catering outlets are not included.

Hotels201+ Rooms101-200 Rooms51-100 Rooms26-50 Rooms