NPD Group VP: Gen Z driving growth in foodservice, “eat-at-home” trend
The average cost of a restaurant meal increased 14 percent over the last five years, and U.S. restaurants experienced 700 million fewer visits between 2014 and 2019. But among a general decline in the restaurant business, there are bright spots and opportunities for growth, according to David Portalatin, a vice president at The NPD Group, a market research firm.
Speaking at the Global Seafood Market Conference in Orlando, Florida, U.S.A. on Tuesday, 21 January, Portalatin said big changes are underway in the U.S. foodservice sector, with a heavy trend toward food consumption at home rather than in dedicated dining establishments. However, that doesn’t always mean Americans are cooking at home – frequently, they’re either ordering in or grabbing take-out, Portalatin said.
The trend is not directly linked to economic factors, as overall, U.S. consumer spending grew 1.8 percent in 2019 to reach USD 2 trillion (EUR 1.8 trillion). Instead, Portalatin said, it reflects a growing desire on behalf of the consumer for convenience from the foodservice establishments they patronize.
“The American consumer increasingly is looking for speed, efficiency, frictionless convenience, and value,” he said.
That trend is being led by Generation Z, a cohort generally defined as having been born in the late 1990s and early 2000s, who are reaching adulthood in the second and third decades of the 21st century. While Generation X may be taking on head-of-the-household status in a majority of homes across the country, it's Generation Z that’s being wooed by the foodservice industry, Portalatin said – for one simple reason.
“In terms of sheer volume, they are going to be the largest of the [age] cohorts,” he said.
And as its members come of age, get jobs, and earn income, Generation Z is increasingly relying on restaurant food to fill its diet, Portalatin said.
“They are about to eat more restaurant meals next year than they did this year, and that trend is going to continue for the next several years. And so while the restaurant industry has faced declining traffic because of this ageing headwind created by aging Baby Boomers down at the lower end of the consumption curve, it’s about to be replaced by the emergence of Generation Z,” Portalatin said. “So winning on the foodservice side of the equation right now is going to be largely dependent on understanding Generation Z and how they like to behave.”
Generation Z’s behavior has led The NPD Group to forecast 0.2 percent growth in total restaurant visits in 2020. Most of those visits will be to quick-service casual restaurants, including fast-casual restaurants, according to NPD forecasting.
“Mid-scale casual dining – which is very important in [the seafood] category – is in this long-term secular decline,” Portalatin said.
But the place where Americans are rapidly eating the most restaurant meals isn’t actually at any type of restaurant – it’s at home, Portalatin said. Digitally ordered delivery is growing at a 16 percent clip per year, and digitally ordered take-out is growing at around 30 percent annually, according to NPD data.
“This trend has implications. Think about your channel partners and the people you’re doing business with. Implications about the future of foodservice and what restaurants will look like,” he said.
NPD data showing growth in everything from video games to leisure-wear to smart home gadgets reveals that people are investing in their comfort at home, and the foodservice sector is an ancillary part of that, he added. Soon, refrigerators will be able to scan what’s inside them and suggest meals based on their contents, or automatically order missing ingredients for home delivery.
“You spend a lot of time right now marketing to retail and foodservice customers, but you’ve got to start marketing to the algorithm now too. You’ve got to figure out how to get into those data streams,” Portalatin said.
Gen Z’s tendency to want to eat more at home may contradict the preferences of Millennials, who “ushered in a new set of food values around natural and fresh and clean eating,” Portalatin said. But now the preferences of the two generations are mixing, with outcomes like the rise of so-called “blended meals,” with one part of a meal sourced from foodservice and other parts made at home.
Plant-based food alternatives – and specifically plant-based burgers – are another outcome of this integration, according to Portalatin. They are seen as a healthier option, but also the burger format is considered the ultimate in convenient comfort food, he said.
Plant-based burgers are reflective of younger customers rewarding innovation, which along with convenience, is the key to unlocking approval from Gen Z, Portalatin said.
“By innovating the form of things the American consumer already loves, or elevating that category on some level, is always a great way of driving growth in the marketplace,” he said.
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