GFC proves a winner for Fast Food Outlets

October 2013

The global financial crisis (GFC) has seen Australians opt for fast food outlets over their independent counterparts, and BIS Foodservice’s Fast Food 2013 Report Series has found they are most popular with mid-to-high income earning women.

“Not to denigrate the quality of fast food in Australia - which includes everything from a drive-thru hamburger to a chicken wrap and prepared meals such as soup - but there is a noticeable ‘trade-down’ effect that occurs in any economic downturn,” explained Sissel Rosengren, head of BIS Foodservice, a division of BIS Shrapnel. 

“As a result, fast food chains are on the increase and are now the dominant force in the fast food market for the first time in Australia’s history, which goes against the notion that we are a country that loves its independents.”

What are we eating?

According to the report series, over the past 12 months Australians spent $15 billion dollars worth of their hard-earned cash on the fast food industry, around $11 billion of which was on food, and $4 billion on beverages.  

Hamburgers and hot chips are the most popular form of fast food - 141 million servings of hamburgers and 193 million servings of hot potato chips were consumed in the past year.

In addition, 47 percent of servings in the fast food market are either beverages or meals and snacks such as pizza, meat pies and sushi.

Of this figure, beverages make up 30 percent, which equals around one billion servings, while the meals and snacks market makes up 17 percent of purchases.

Overall, it’s estimated Australians consumed 3.088 billion servings of fast food (including beverages from fast food outlets) in the past 12 months. 

Doing away with traditional stereotypes

The report series uncovered women are the nation’s highest consumers of fast food, making up 56 percent of the market.

“Many might assume women are buying fast food for others, but what this report shows is that women are actually more likely to eat fast food than men,” said Rosengren.

“The assumption is that men are typically the fast food eaters, given the marketing by fast food chains usually focuses on blokes relaxing at the beach in their ute with a chicken burger or eating a pizza while watching the footy. But women are the biggest fast food eaters across all fast food categories, by a healthy majority.”

It also found 35 percent of fast food eaters earn between $50,001 and $100,000, meanwhile those that earn $50,000 or less make up 30 percent of the market - proof that fast food is not simply confined to low-income earners.

 “You are just as likely to see someone in an office job eating a hamburger and chips as you are someone who is only eating fast food because it is the cheaper option.

“What this suggests is that there has been a noticeable trade down effect in the total foodservice market in the last five years," added Rosengren. 

Fast food chains vs. independent outlets

Outlets that offer fast food yet do not fall under the brand of a fast food chain, such as Chinese takeaways, fish and chips shops and pizza outlets have struggled during the GFC.

In 2005, 8,969 independent fast food outlets were in operation across Australia, meanwhile in 2009 this dropped to 8,498.

While this figure has increased over the past two years, its pre-GFC number has not been achieved as yet.

On the contrary, fast food franchises have increased in outlet numbers by an average 5.3 percent annually over the same period, and snack food chains have increased by 10.8 percent on average per annum in this period.

 “Australia has never been a chain-loving country,” said Rosengren. “If you look at coffee outlets for example, there are around 13,000 outlets across Australia but only around 2,000 of them would be considered chains such as Starbucks.

“This is the first time in Australian history that chains now dominate the landscape in any sub-sector of the foodservice market.”

She added many independent fast food outlets are struggling due to the quality of their offerings.

“More often than not, fish and chip stores in Australia will serve frozen chips and battered fish for a price that does not match the quality."

“If you go to New Zealand they are competing with the chains by offering quality, fresh fish and hand-cut chips for less than the price of a value meal at most chains. They compete on cost and quality, but in Australia they have slipped to the point where many compete on neither," Rosengren said. 

An industry on the decline...

The report series points to the fact that the entire foodservice industry, which encompasses restaurants, cafés and clubs, could struggle over the next six to 12 months.

There have been fewer visits to fast food restaurants in the past six months, with a net decline of 41 percent reported, and consumers are expected to decrease their visits by a further 26 percent over the next six months.

 “With fast food now expected to struggle in the next six to 12 months, the industry as a whole will struggle to keep its head above water,” said Rosengren.

“The shine is coming off the fast food chains which are now starting to feel the same pinch the rest of the industry has been feeling.”

The Foodservice Dollar - which looks at the amount Australian households' allocate to eating out in the scheme of their overall food and non-alcoholic beverage budget, highlights this trend:

  • 1960 - 12 cents in the dollar
  • 1980 - 25 cents
  • 2005/06 - 38 cents
  • 2010/11 - 34.4 cents
  • 2013 - 33.5 cents 

Expenditure is expected to continue to fall as Australians opt for healthier alternatives and tighten their budgets.

 “The outlook for the foodservice market appears weaker as consumer confidence wanes and they look to get healthier.

“But there are opportunities for those in the foodservice industry to set themselves apart from the rest, as eating out remains a way of life for Australians despite the slowdown in recent times,” added Rosengren.