New research from Simon-Kucher investigates how consumers will react to rising prices in the restaurant industry as well calories being published on menus from April 2022
April 2022 sees two further impacts on the restaurant industry at a time where supplier costs continue to increase and staffing shortages persist. The first of these is a return to 20% VAT levels across hospitality, alongside the new requirement for organisations employing more than 250 staff members to print calories on their menus.
Overall spending and price expectations
- Consumer spending habits are being hit and dining out/food ordering are the areas expected to be most impacted: 90% of consumers believe the cost of living is going to rise soon with 83% indicating this is impacting their general spending habits. When asked where they will consider reducing spend, ‘Dining out in restaurants’ and ‘Ordering food for delivery’ has the highest response with 58-59% selecting these areas.
- However, consumers are currently expecting prices to increase above current inflation levels: Asked the price they’d expect a £10 item to be now, the median response was £12 with answers ranging from £11.50 to £14.
Restaurant pricing insights
- Restaurant consumers indicate that they will save money on their total bill by reducing the number of courses ordered: Around 40% of those who typically order 2 courses indicated a likelihood to downgrade to just a main course. 60% of those ordering 3 courses would downgrade to less courses, with desserts likely to win over starters when this decision needs to be made.
- Price increases will cause 30% of consumers to consider changing their main order: Price rises against some classic British main courses (e.g. Fish and Chips and Margherita Pizza) led 30% of consumers to consider another option on the menu. The good news for restauranteurs is that the respondents didn’t always trade down the menu, almost half of the moves were to higher priced products. Also, not all price changes were equal, consumers are expected to respond to key price thresholds. For dine-in formats moves over £8/10/12 needs to be implemented with greater care than other price points.
Rosalind Hunter, Partner at Simon-Kucher & Partners. Says: “Not all price changes are equal across a menu, this means restaurant companies need to act surgically and strategically to ensure an optimal margin response. With calories now playing a role in customer selection, it means even more science needs to be put behind the menu and price changes than ever before to ensure success.”
Calorie insights
- Consumers feel that introducing calories onto menus would have a positive impact on obesity, and overall knowledge of recommended calorie levels was high: Only 20% did not feel the change would have a positive impact. Generally, knowledge of calorie recommendations was good, with consumers expecting an evening meal to be around 750 calories. In addition, 38% indicated they had checked calories of a dish online before ordering.
- Consumers indicated that calories being printed was likely to reduce the number of courses selected: 20-30% indicated they would reduce their total courses, around half that seen in response to price increases. Those choosing desserts are the least likely to downgrade, indicating this group are least worried about the calorific size of their meal.
- Adding calories to a menu with prices had the most impact on main course choice: 38% of respondents changed their order when presented with calorie information next to price, vs. 30% for a price increase of 5-10% on the same items. Understandably the changes tended to be healthier: 30% of respondents selected a main course with lower calories once the calorie count was depicted.
- Knowledge of the calories in some classic British dishes was more varied though: Asked to provide acceptable corridors for calories per item, we see average calories for items such as a 12” Margherita Pizza and Fish and Chips being viewed as acceptable for around 50% of consumers. While a Chicken Caesar salad has less calories on average, it was also in line with consumer expectations for the product. On the other hand, Lasagne and Mediterranean salads had higher acceptable calories than their true calorie levels, indicating these may be products consumers ‘downgrade’ to once calories can be seen. The biggest shock to our respondents was the Cheeseburger and Chips at over 1,000 calories - this was the least acceptable to consumers and the most downgraded in the research.
- Rising calories would have a similar impact to consumer choice as price: Across the pricing experiments, 30% of consumers shifted their menu selection in response to a 5.4% or 10% price increase, the same proportion also shifted when calories are raised on the same menu items.
Ana Trifonova, Manager at Simon-Kucher & Partners. Says: “We will see a shift in consumer selection once calories are printed on menus, unlike price changes this shouldn’t change as much over time but it will add a new factor to consider when undertaking NPD (new product development) and assessing future price points as customer will now choose items differently.”
About the study: The research was conducted by Simon-Kucher & Partners directly in March 2022. The panel was arranged by Lucid Holdings UK and respondents were weighted to match a national representative data sample. The total sample covered in the research was 1,031.
Simon-Kucher & Partners, Strategy & Marketing Consultants:
Simon-Kucher & Partners is a global consulting firm with over 1,100 professionals in 34 offices worldwide focusing on TopLine Power®. Founded in 1985, the company has more than 30 years of experience providing strategy and marketing consulting and is regarded as the world’s leading pricing advisor.