News & Insights

The business trends shaking up the food service sector

Published 08 November 2019

Dark’ kitchens, aggregated dining apps, plant-based meat and the rise of the gastro pub – the food service industry in Australia is changing, but one trend is a constant: we like someone else doing the cooking.

The number of Australians dining out is among the highest in the world. On average we spend a third of our food budget on eating out (or ordering in) and we are happy to do it for breakfast, brunch, lunch and dinner. While industry competition is fierce, the sector is expected to grow by an annual compound rate of 5.1% from 2018‒2023.

Our flat economy has had an impact but only on the type of food outlet we’re ordering from: we’re trading down and takeaway is king. Cafés and quick service outlets are the winners, with mid-level and fine dining following on by offering more casual venues and menus.

Pubs are gaining ground as food service venues, the humble burger is increasingly popular, in spite of the swing to healthier meal choices, with gluten-free options continuing to record steady growth.

Hold the java

Along with these developments, café culture is changing, with the number of espresso coffee orders declining by about 34% between 2015 and 2017. Surprisingly Australians drink more tea than coffee, although that may not be true in the country’s coffee capital, Melbourne.

On the upside cafés benefit from the ability to serve partly or completely prepared foods, an advantage when it comes to maintaining budgets and reducing wastage. Every business owner should be recording what your most popular and unpopular items are, what are the most profitable and how many customers you’re serving to help decide if you can raise the price or drop the item from the menu altogether.


Explore new options

While cafés, pubs and fast food outlets are already positioned to appeal to current tastes, other food service operators can expand their offerings by opening for breakfast and brunch, and adding menu options that reflect consumer demand for healthier food packaged to eat on the go.

In Melbourne and Sydney some businesses have experimented with meal delivery services out of their existing restaurants or in some cases dedicated non-service ‘dark’ kitchens, but the models for profitability have yet to be successfully established for both the meal providers and the delivery agency, as evidenced by Foodora’s collapse in 2018. Based on statistics from earlier that year researcher Morgan Stanley predicted Australia's online takeaway market could grow to $3.1 billion by 2022 with 18% online penetration. 

Challenging conditions

Most food service operators are competing for the heavily populated east coast markets, with Western Australia and the Northern Territory grappling with variable supply problems. Overall there has been a marked decline in investment in plant and equipment in the past five years, indicative of industry challenges including

  • strong competition
  • increased utility costs
  • rising food costs
  • staffing issues.

Don’t sabotage yourself

Insurance is another area where you may be tempted to cut costs, but this could lead to losing everything you’ve worked for if a worst case scenario – such as a fire – occurs.

You may be able to save on your insurance by ‘bundling’ your policies or purchasing a tailored package. You could also be eligible for discounts if you’re a member of a professional or industry association. You may be eligible for a premium funding arrangement that enables you to spread your repayments over the year instead of in one lump sum. Ask your Gallagher broker about what policy combinations and deals are available for your business before making a choice.

Gallagher’s specialists can help hospitality businesses identify their operational exposures, advise on formulating a risk management plan and structure insurance cover to safeguard your operations.

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Further reading

Food production insurance and risk management expertise

Insurance market update: food production challenges from farm to table

Gallagher provides insurance, risk management and benefits consulting services for clients in response to both known and unknown risk exposures. When providing analysis and recommendations regarding potential insurance coverage, potential claims and/or operational strategy in response to national emergencies (including health crises), we do so from an insurance and/or risk management perspective, and offer broad information about risk mitigation, loss control strategy and potential claim exposures. We have prepared this commentary and other news alerts for general information purposes only and the material is not intended to be, nor should it be interpreted as, legal or client-specific risk management advice. General insurance descriptions contained herein do not include complete insurance policy definitions, terms and/or conditions, and should not be relied on for coverage interpretation. The information may not include current governmental or insurance developments, is provided without knowledge of the individual recipient’s industry or specific business or coverage circumstances, and in no way reflects or promises to provide insurance coverage outcomes that only insurance carriers’ control.
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