Cafes eating into fast-food operators’ share of the takeaway market

Posted by AFN Staff Writers on 24th March 2014
Cafes eating into fast-food operators’ share of the takeaway market

The market for convenient takeaway meals has become a battleground between small independent cafes and the fast-food heavyweights, according to Australian market research organisation IBISWorld.

Fierce competitions between cafes and fast-food services industries continues, and cafes are encroaching on the traditional territory of fast-food operators, offering a “wider variety of ready-to-eat options for consumers on the go”, according to IBISWorld.

The $15.3 billion fast-food services industry continues to dwarf the $4.2 billion cafes and coffee shops industry, but cafes are expected to expand by 3.7 per cent over 2013-14 compared with 2.8 per cent for fast-food operators.

Fast food attempts to gain coffee market share

According to IBISWorld, fast-food operators have sought to take ground from cafes in the coffee market by introducing cafe-style options. However, IBISWorld said rising health consciousness was working against them, as consumers increasingly opted for cafes over fast-food restaurants.

More consumers are living their lives “on the run” by trying to pack more into their already busy schedules, according to IBISWorld. While such a trend would usually spell profit for fast-food vendors, Australia’s booming coffee culture has diluted their success. The popularity of coffee has encouraged cafe operators to offer a range of complementary meals, allowing busy consumers to pick up a sandwich along with their usual coffee. This broader scope of operations has increased convenience for consumers and provided an attractive option for consumers who are now spoiled for choice when lunchtime comes around, according to IBISWorld.

Consumers demanding ‘higher quality food options’

An appreciation of coffee and fine food has permeated the Australian food scene and consumers have become more discerning, according to IBISWorld.

Consumers are demanding higher quality food options and are increasingly willing to pay a premium for it. The trend towards gourmet eating has boosted the popularity of cafes, with the typical cafe spread often perceived as “fresher and healthier” than that of fast-food outlets.

Fast-food providers have responded with their own ranges of gourmet options, focusing on higher quality ingredients and special menus. Higher quality meals and the emergence of more gourmet fast-food providers have supported growth for the fast-food services industry, according to IBISWorld.

Fast food’s image problem

While fast-food operators have made efforts to improve quality, IBISWorld said they have been unable to shake their unhealthy image.

With obesity and diabetes dominating media reports, consumers are becoming increasingly health conscious. Fast-food operators have borne the brunt of this negative media, according to IBISWorld, while cafes have benefited from their healthy image.

Meanwhile, healthier eating has bolstered the cafes and coffee shops industry. With food items often carrying higher margins, increased food sales at cafes have significantly boosted industry revenue. Some fast-food operators have also benefited from the healthier eating trend, including Subway, which has marketed the health benefits of its products. However, IBISWorld said Subway was the exception, with most traditional fast-food operators “feeling the pinch” and looking to introduce ‘healthier’ menus.

The cafes and coffee shops industry is expected to continue its strong performance, wrestling market share away from fast-food providers. Consumers are likely to continue to opt for convenience, high-quality and healthier options, according to IBISWorld.

Fast-food operators have sought to stem the flow to cafes by introducing new menus. However, IBISWorld said the fast-food providers “may find it easier to drop unhealthy menus than shake their unhealthy images”.