Steve Gotham, project director, Allegra Strategies

Something rather exciting is stirring in UK supermarkets and it’s fast becoming an ever more important battleground.

While it goes by the unglamorous title of food service, in-store executions are anything but, as visits to high street branches in Kensington or Marylebone will quickly prove.

The all-day, fat-fest breakfast has long been a feature of many a supermarket café. However, a new chapter is unfolding as consumers become more receptive to newer concepts and as more operators sense that the time is right to be pushing out the boundaries of ways that they can add value to their core food offer.

Greater receptiveness is being driven by a number of factors – not least the embracing of food-on-the-move lifestyles, more pervasive premium and indulgence trends, and a widening interest in food culture.

Supermarkets are not alone in having to respond to rising consumer demand for shopping experiences that offer more sensory stimulation. However, unlike many retailers, they are in a good position to do so.

Arguably, the growth in new food service actually began with the expansion of the top-end food halls of Harvey Nichols and Selfridges, with their upmarket eateries inspired by leading chefs. Subsequently, smaller niche specialists, including Baker & Spice, Daylesford Organic and Natural Kitchen, have led a second wave that comprised the rise of food-service boutiques.

We are now entering a third wave of market evolution – and it is one that promises to have a far wider-reaching impact. The filter-down process has now reached the top end of the supermarket sector – with Marks & Spencer in particular, but also Waitrose and Whole Foods Market, which are all testing new trading concepts. M&S, with its eat-over delis, restaurants, standalone kitchens and hot food-to-go formats, is in the vanguard of finding new ways of increasing customer spend.

The big question is how far into the mass market this trickle-down process will penetrate. M&S and Waitrose have higher shares of affluent customers and more favourable high street skews than many competitors lower down the value chain. Moreover, the added operational complexities may persuade the likes of Asda and Tesco that they are better off targeting wallet share by driving their non-food product and services.

Of the majors, this leaves Sainsbury’s and Morrisons. Morrisons has been doing old-style supermarket food service for years, yet should have made far more of its non-food opportunities. Sainsbury’s, on the other hand, looks like it’s getting to grips with non-food better now, but would be advised not to take its eye off the food-service pound.

Topics