Meal deal or no deal? Food to go category report 2019

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Poundland and B&M have swooped into meal deals with offers that undercut the mults. Can they win in this price-driven arena?

Don’t mess with the meal deal formula. That’s the unwritten rule of food to go. Sainsbury’s serves as a cautionary tale for anyone who dares to think otherwise. The backlash from its revamped meal deal in 2016 - which saw its much-loved Taste the Difference sandwiches removed from the £3 bundle - has achieved near-legendary status.

So anyone entering this market had better be brave. Especially if they are challenging the norm. In which case, B&M and Poundland must have courage in spades.

Last October, B&M became the first bargain store to venture into the meal deal market. Slashing the standard £3 price point by nearly half, it unveiled a £1.75 bundle including a sandwich, crisps and a drink.

Poundland joined the party in May with a £2 deal offering no fewer than four items: a sandwich, crisps, snack and a drink.

It’s pretty bold stuff, considering £3 has long been the norm. And in an overtly price-driven market such as meal deals, any savings are sure to grab the headlines. Indeed, shoppers named price as the most important factor in their meal deal choice in an exclusive poll for The Grocer by Harris Interactive.

So do these bargain operators have a genuine deal on their hands? Could they steal share from the supermarkets? If so, what can the meal deal stalwarts do to fight back?

It’s certainly the right environment in which to unveil a budget meal deal. Shoppers are keeping a close eye on their purse strings, which is reflected in the performance of the food-to-go market.

“Pressure on household budgets is making shoppers cautious about what they spend on”

On the face of it, things are looking pretty positive. Consumers have splashed out an extra £720m across supermarket, convenience and out-of-home [Kantar 52 w/e 11 August 2019]. Take a closer look, though, and it’s clear consumers are cutting back.

Shoppers have made 32.5 million fewer trips to the food-to-go aisles this year. Even when they do make a trip, they are buying less than last year. That has pushed total volume sales down 1.1%. Value growth has been entirely driven by price.

“Declining consumer confidence is putting pressure on household budgets, making shoppers more cautious about what they spend money on,” says Kantar analyst Taryn Ferguson. “That’s driving shoppers out of food to go.”

Indeed, Waitrose named ‘mindful spending’ as one of the key trends in its Food and Drink Report this year. Contrary to how it sounds, that’s not practising mindfulness while buying your tuna & sweetcorn bloomer. It’s thinking about whether you need to buy the sandwich in the first place.

Sushi sees £40m value decline as Brit snackers seek better value

“Daily outlays soon add up, so families are making small savings across the board,” said Natalie Mitchell, head of product at Waitrose, in the report. “Half of Brits are buying fewer lunches out, takeaways and snacks, and 36% claim to be buying fewer non-essentials and considering more carefully whether they need something before buying it.”

The working lunch is one area that is particularly suffering. There were 5.9 million fewer food-to-go lunch occasions this year, says Kantar, driven by a growing number of shoppers bringing in their own food during the week.

“Considering how cost-conscious shoppers have become this year, it’s not surprising,” says Kantar’s Ferguson. “Especially when you consider a food-to-go lunch is almost twice as expensive as a carried-out lunch.”

That mentality is hampering sales at the top end of the market. Take sushi, which has the highest average price in food to go at £5.29 per pack. Last year, it was the star performer in the category. This year, sales have plummeted an eye-watering 30.9% [Kantar].

Price-driven growth: food-to-go value sales

Food to go sector performance
	Value (£m)	% growth	Market share
Drinks	11556.4	3.2	42.6
Sandwiches	5577.1	0.7	21
Snacks	5536.6	2.5	20.9
Savoury pastries	1366.3	3.4	5.1
Salads	773.9	6.7	2.9
Sushi	89.4	-30.9	0.3

Source: 52 w/e 11 August 2019

The majority of growth in food to go this year has come through price rises. Sandwiches, snacks and savoury pastries have all seen volume declines of 1.5%, 3.3% and 3% respectively.
Afternoon snacks have also suffered as the total number of occasions fell 1.8% to two billion.
“As consumer confidence dips we are increasingly carrying out our lunches and snacks from home,” says Kantar analyst Taryn Ferguson. “As lunch and afternoon snacks are the two largest consumption moments for food on the go, the category has been impacted by this behaviour change.”
One area that did hold on to its volumes is drinks. Considering this year has been cooler than 2018, it’s unsurprising that hot drinks are growing ahead of their cold counterparts.
A few cold drinks are in strong growth, however. Iced coffee and tea are up 9.1% thanks to new ready-to-drink brands entering the market. “These products are attracting new, younger consumers, potentially driven by the fact that they are less than half the price of a barista-made iced coffee or tea,” says Ferguson.

Cheaper options win

On the other side of the coin, cheaper options are flourishing. Brits are lapping up promotions like there’s no tomorrow. The number of food-to-go trips including promotions grew 6.3% last year. According to Kantar figures, they are now worth 7% of the total market.

“Convenience store and supermarket trips are most likely to be promoted, but even channels less associated with promoting are growing through their use, notably bakery & sandwich shops and cafés and coffee shops,” says Ferguson. “These promotions are successfully encouraging consumers to make more food-to-go trips - helping to address the frequency declines in the wider market.”

This price-savvy mentality is also pushing more shoppers towards the savings offered by a meal deal. Over this summer, the number of lunchtime meal deal occasions soared by a whopping 77.6% in the mults [Kantar 12 w/e 9 September 2019].

“Last year sushi was the star of the category. This year sales plummeted an eye-watering 30.9%”

That has translated to a solid performance for the supermarkets, whose food-to-go value sales have grown 8.2% over the full-year period. That’s ahead of convenience outlets at 3.8% or cafés and coffee shops at 2.7%.

Price is clearly important in this equation. More than a third of consumers buy a lunchtime meal deal at least once a week, found a poll of more than 2,100 shoppers conducted by Harris Interactive for The Grocer. Among those shoppers, 29% named price as an important factor in their purchase - ahead of filling, flavour and variety.

It suggests bargain stores could steal a march on the supermarkets with their rock-bottom prices. Still, Wayne Greensmith, head of category marketing at food-to-go brand Adelie Foods, says these cheaper offers are likely to appeal to a distinct consumer base.

“Poundland and B&M will find their customers differ from the typical food-to-go shopper,” he says. “It will be mainly families looking for quick and easy lunch solutions for that day or for lunchboxes throughout the week, rather than the standard worker popping out on their lunch break. These value deals are serving a different need state to supermarkets and will therefore attract a different consumer.”

Price matters: how shoppers view lunch meal deals

Shopper behaviours and attitudes to lunch meal deals

5% buy a lunch meal deal every day
40% eat fewer lunch meal deals now than a year ago
57% of those buying fewer meal deals this year are doing so to save money
25% would be willing to spend up to £4.99 on a lunch meal deal
34% would pay more than £5 for a lunch meal deal if the products were high quality

Source: Harris Interactive consumer poll of 2,134 shoppers, November 2019.

Points of differentiation

Nevertheless, there is a need for supermarkets to compete on more than price. They must also have a clear point of differentiation against their cheaper rivals. Quality may be the most obvious one. After all, just 20% of shoppers in our Streetbees poll believed B&M and Poundland were capable of providing a good lunch deal.

Veronica Troy, consumer behavioural analyst at Canvas8, says this could prove a sticking point for these emerging bargain deals. “Consumers are increasingly expecting certain standards when it comes to food to go,” she says. “The category hasn’t revolved solely around convenience for a long time, with factors like high-quality ingredients and sustainable sourcing becoming table standards rather than luxuries for many. Any budget food-to-go proposition needs to recognise that while cost is a consideration, it’s among one of many these days.”

Variety is another factor that could sway shoppers. In this area, too, there is a massive gulf between the supermarkets and the bargain stores. Poundland offers nine standard cold sandwiches, including classic flavours such as BLT, Ham & Cheese and Cheese & Onion, alongside five flavours of crisps. None of the sandwich options are suitable for vegans. B&M’s deal has even less variety, including five cold sandwiches (again, no vegan option) and four crisp flavours.

“Any budget food-to-go proposition needs to recognise cost is not the only consideration”

Tesco, by comparison, offers around 90 different meal deal mains including wraps, paninis, salads, toasties and sandwiches. Plus, it is continually adding new flavours and formats to the deal. In June, it signed an exclusive deal with food-to-go brand My Global Kitchen, which includes world-inspired options such as a Mexican Rainbow Chicken Wrap and a Spicy Korean Beef Sandwich. All are included in the standard £3 meal deal price.

These more unusual alternatives to the classic BLT could go some way to winning over shoppers, says Kantar’s Ferguson. “Providing something different is an increasingly important driver of sales. This year there were 26 million more food on-the-go lunches chosen because consumers were looking for a change compared with last year.”

If supermarkets get this variety and quality right, they stand to charge far more. Take M&S. Its food-to-go aisles include a Moroccan Bang Bang chicken salad, a Lemon & Cumin Chicken Pot and a wheat-free Piri Piri Wrap, many of which will set shoppers back a fiver. Its lunch meal deal comes at the same price. On the face of it, that may be a deterrent. After all, 80% of respondents to our Harris Interactive survey said that was too expensive. However, 34% of those respondents said they could be convinced to spend a fiver or more on a lunch deal if higher-quality products were included. Which is precisely the market M&S is targeting.

“There’s still demand for a real treat at lunchtime,” says an M&S spokesman. For that reason, M&S is highlighting its quality credentials alongside investment in new flavours. It points to the recently launched Our Best Ever Ham & Cheese Sandwich and premium Lobster Roll, both of which have proven “very popular”.

It is also investing in a new format: hot food. M&S is in the process of rolling out revamped Hot Hold counters into 100 of its stores. Admittedly, hot food to go has proven a challenge in the past. M&S says there have been “several failed attempts”. Positioning was part of the problem, says Rebecca Tye, M&S head of new business. “We hadn’t learned from people like Pret who put hot hold right by the sandwiches. We might have put it 30 minutes away, so people have already made their choice,” she explains.

“Providing something different for consumers looking for a change is increasingly important”

“This time we have really developed and innovated a substantial offering in Hot Hold.” This offer includes everything from a chicken tikka masala to a supergreen protein box and a jumbo sausage roll. It could be another way of pushing through higher prices: the supergreen protein box comes at £6.

It’s a risky strategy. After all, The Grocer reported earlier in November that Waitrose had pulled three of its four Kitchen concepts, which offered a similar hot food premise. However, an IGD survey at the start of the year suggests there may be potential. It found 41% of food-to-go shoppers would like a larger selection of hot products, beating demand for all other food-to-go sectors including cold food (32%) and vegan (25%).

Others are also confident in the opportunity. Co-op launched its first On The Go concept store by Manchester Piccadilly Station last November, including a self-serve bay for hot soup and porridge. It has since added a second site in London’s America Square, with further sites planned for 2020. The new sites are positioned in high-traffic areas favoured by city workers, and “place increased focus on food ranges suitable for shoppers who want to grab breakfast, lunch or dinner on the go,” says Charlotte Waring, food-to-go development manager at Co-op.

Supermarkets win share: food-to-go sales by channel

Top eight food to go channels
	Value (£m)	% growth	Market share
Cafe & Coffee Shop	6372.1	2.7	24.0
Bakery & Sandwich	5029.8	3.1	19.0
Supermarket	3391.6	8.2	12.8
Workplace & Education	1930.1	4.3	7.3
Leisure	1733.8	7.8	6.5
Convenience	1261.8	3.8	4.8
Total Travel	1069.9	-2.0	4.0
High Street	963.5	0.4	3.6

Source: Kantar, 52 w/e 11 August 2019

Supermarkets have been the main winners in the food-to-go market this year, with a whopping £258m uplift in sales.
Unlike other channels, supermarkets have managed to increase their number of food-to-go trips (up 5%).
The proliferation of new ready-to-drink cold coffee and tea brands helped drive increased sales in supermarkets. Growth also came from sales of sandwiches and sweet and savoury snacks.
Another channel gaining share is convenience, which has amassed an extra £45.8m in sales.
It’s no coincidence that both supermarkets and convenience stores are most likely to offer promotions. Promoted spend grew 6.3% this year.
Bakery and sandwich shops also grew ahead of the total market, increasing trips by 2% despite average price hikes of 4%.
Sandwiches were a key driver of growth for this channel, accounting for 40% of its food-to-go sales.
Younger people were also a factor. “Millennials are more likely to purchase in convenience and bakery & sandwich outlets,” says Kantar analyst Taryn Ferguson.

Warming options

There could be another benefit to these hot food initiatives. Warming options are likely to go down well in winter, which is typically a tough time for food to go. Because when temperatures fall, sales tend to fall too.

Kantar says that is partly to blame for the volume declines in food to go this year. “In 2018 we were driven out of home by the hot weather, and food-to-go sales soared as a result,” says Kantar’s Taryn Ferguson. “This year has been comparably cooler, leading to a slowdown in growth across most sectors.”

“This year has been comparably cool, leading to a slowdown in growth in most sectors”

Weather analytics platform Planalytics says that effect is just as evident outside of the summer months. “This year the UK recorded its second-warmest February on record, with long spells of dry weather,” says VP of marketing David Frieberg. “That increased food-to-go footfall, as people were drawn out of homes and workplaces for a taste of spring.”

Conversely, the wet weather in October put a dampener on sales. “Although the month started on the warm side, by the end it was the coolest October since 2012 and wettest since 2013,” Frieberg says. “Footfall levels in stores fell by mid-month as the temperatures dropped and rainfall increased.” That weather drove wrap sales down 10%, salads down 5% and sandwiches down 3%.

So perhaps hot food is just what’s needed to heat up the food-to-go market. So long as it doesn’t mess with the sacred territory of the lunchtime meal deal.