Once dominated by hamburgers and fries, the fast food industry has undergone a health kick over the past five years.
The shift towards healthy eating has been driven by a rapid increase in consumer awareness about the nutritional content of fast food, a conscious effort by consumers to eat a balanced diet and an influx of healthier options by the industry’s heavyweights.
Combined, these factors are estimated to lead to a 4.1% per annum rise in industry revenue over the five years through 2011-12. However, intense competition within the industry has constrained industry performance and profit. Trends in real household disposable income, the age distribution of the population, competition from convenience stores and supermarkets, and growth in the variety of easy-to-prepare meals have also affected consumer demand for fast food.
Get business news first
Sign up to SmartCompany’s daily newsletter
Traditionally, fast-food retailers competed based on price and value-for-money deals. However, rising consumer concern about the fat content of fast food, the growing popularity of healthier fast food and continued price-based competition have somewhat changed the landscape for industry operators. The trend towards healthy eating stems from a growing need in the industry for a viable and healthy alternative to traditional fast food. While some operators have responded by adding new items to their menus, the rapid rise in consumer demand has created new growth areas for potential entrants. As a result, there has been an influx of new players offering fast food like juice, salads and sushi rolls.
Growth in the number of women returning to the workforce and the subsequent rise in demand for quick and healthy dinners has had a significant effect on industry revenue over the past five years. The industry has been subject to increasing competition from supermarkets, which placed greater emphasis on their range of home-meal replacement items or meal-solution products. The expansion of fast food on offer at convenience stores has also fuelled competition as time-poor, cash-rich consumers continue to seek healthy alternatives to traditional fast food.
Industry at a Glance
Industry revenue is expected to increase by 3.2% in 2011-12, to reach $15.2 billion. A rise in household disposable income is expected to support fast-food sales. However, a decline in consumer sentiment could have a mixed effect on the industry. On the one hand, consumers will seek value for money in fast-food meal purchases and some may trade down food purchases in favour of lower priced meal options. However, many consumers view fast food as an affordable luxury, as indicated by the industry’s strong revenue growth during the height of the global economic downturn. Retailers will respond by placing greater focus on their food offers. Sales growth will also be spurred by the rising popularity of iFast Finder, a fast-food application for iPhone, iPod and iPad users. This is expected to revolutionise the industry and boost the convenience with which fast food can be ordered.
Consumer demand for nutritious fast food is expected to drive industry performance over the five years through 2016-17. Despite continued competition from supermarkets and convenience stores, industry sales will benefit from an increased focus on healthy eating. Fast-food retailers will focus on providing consumers with an evolving and adaptable product selection. This is expected to result in a 2.7% per annum increase in industry revenue over the next five years, to total $17.3 billion in 2016-17. Increases in real household disposable income and changes in the age distribution of the population are also expected to drive demand for fast food.