Cafes eat into fast-food operators’ share of the takeaway market

IBISWorld
The market for convenient takeaway meals has become a battleground between small independent cafes and the fast-food heavyweights. Fierce competition between the cafes and fast-food services industries continues. Cafes are encroaching on the traditional territory of fast-food operators, offering a wider variety of ready-to-eat options for consumers on the go. The $15.3 billion fast-food services industry continues to dwarf the $4.2 billion cafes and coffee shops industry. Nevertheless, cafes are expected to expand by 3.7% over 2013-14 compared with 2.8% for fast-food operators. Fast-food operators have sought to steal ground from cafes in the coffee market by introducing cafe-style options. However, rising health consciousness is working against them, as consumers increasingly opt for cafes over fast-food restaurants.
More consumers are living their lives on the run by trying to pack more into their already busy schedules. While such a trend would usually spell profit for fast-food vendors, Australia’s booming coffee culture has diluted their success. The popularity of coffee has encouraged cafe operators to offer a range of complementary meals, allowing busy consumers to grab a sandwich with their usual coffee. This broader scope of operations has increased convenience for consumers and provided an attractive option for consumers who are now spoiled for choice when lunchtime ticks around.
An appreciation of coffee and fine food has permeated the Australian food scene and consumers have become more discerning. Consumers are demanding higher quality food options and are increasingly willing to pay a premium for it. The trend towards gourmet eating has boosted the popularity of cafes, with the typical cafe spread often perceived as fresher and healthier than that of fast-food outlets. Fast-food providers have responded with their own ranges of gourmet options, focusing on higher quality ingredients and special menus. Higher quality meals and the emergence of more gourmet fast-food providers have supported growth for the fast-food services industry.
While fast-food operators have made efforts to improve quality, they have been unable to shake their unhealthy image. With obesity and diabetes dominating media reports, consumers are becoming increasingly health conscious. Fast-food operators have borne the brunt of this negative media, while cafes have benefited from their healthier image. Meanwhile, healthier eating has bolstered the cafes and coffee shops industry. With food items often carrying higher margins, increased food sales at cafes have significantly boosted industry revenue. Some fast-food operators have benefited from this trend, including Subway, which has marketed the health benefits of its products. However, Subway is the exception, with most traditional fast-food operators feeling the pinch and looking to introduce healthier menus.
The cafes and coffee shops industry is expected to continue its strong performance, wrestling market share away from fast-food providers. Consumers are likely to continue to opt for convenience, high-quality and healthier options. Fast-food operators have sought to stem the flow to cafes by introducing new menus. However, the fast-food providers may find it easier drop unhealthy menus than shake their unhealthy images.