Quick and cheesy still number one, but healthier options drive fast food sector’s growth

12:12AM | Monday, 16 December

The pizza restaurant and takeaway food industry has grown by an average of 3.2% per annum for the past five years, but the industry has had to adapt to changing consumer demands.   A trend toward healthier options driven by consumers has led the fast food sector to extend its offering to encompass more waist-line friendly alternatives to the traditional fried, greasy food.   The latest IBISWorld report into the sector, released late last week, shows the sector has needed to evolve over the past five years, as consumer appetites and finances have changed.   IBISWorld senior industry analyst Ryan Lin told SmartCompany consumers are wanting healthier options, but their lifestyles are getting busier.   “The increasingly health consciousness of Australians has been the largest motivator towards healthier eating options,” he says.   The IBISWorld report found product innovation has been key to the sectors growth in the past five years.   “Convenience trends and changing menus have helped the industry to recover strongly from the financial crisis, which led consumers to trade down or substitute foods for cheaper alternatives,” the report says.   “Technological developments have not only contributed to operational efficiency, but have also enabled more personalised customer ordering experiences.”   Technological changes in conjunction with the expansion of city boundaries have resulted in the current growth phase for the sector.   IBISWorld says the largest pizza franchises have struggled to keep up with the new growth corridors, created through new residential developments.   “As new growth corridors are explores, new geographic markets will continue to emerge,” the report says.   “The development of mobile and internet technology to improve the customer experience will continue to fuel revenue growth for the largest industry operators.”   But while the sector has adapted to changing consumer desires and new technologies, in the next five years frozen products from supermarkets will prove a challenge.   “Frozen products in supermarkets have threatened the takeaway pizza restaurant industry as these products provide a similar, if not better, level of convenience,” Lin says.   “Consumers can readily purchase an affordable frozen product, such as a frozen pizza, from a supermarket which they can quickly heat up and consume.”   Other challenges to the industry include increasing divergence between price and quality considerations and intensifying competition between industry operators.   In the 2013-14 financial year IBISWorld predicts the industry will grow by 2.1% and in the next five years will have an average growth rate of 2.3%.   Lin says the slower rate of growth for the sector will be predominantly influenced by the rising competition between the brands.   “Over the coming years, competition between established pizza chains will grow, with large players such as Pizza Hut and Domino’s competing aggressively for market share,” he says.   “Supermarkets offering a more sophisticated range of goods such as frozen foods, and healthy takeaway meals such as salads, will increasingly work to undermine the dominance of pizza fast food restaurants.”   Currently, Domino’s Pizza has the largest share of the market with 13.5%, while EBA Pizza Holdings has 7.2% and Yum! Restaurants Australia dominates 5.8%.   Demand for pizza is expected to be strongly influenced by income levels.   The rise of fast-food chains such as Grill’d have been most successful in high income earning suburbs, while those in the outer suburbs typically have a lower level of discretionary income.   This article first appeared on SmartCompany.

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