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Foreign Agricultural Service GAIN Report Global Agriculture Information Network Voluntary Report - public distribution Date: 4/3/2000 GAIN Report #AS0012 Australia HRI Food Service Sector Hotel, Restaurant, Institutional Food Service Sector Report 2000 Approved by: Randolph H. Zeitner U.S. Embassy Prepared by: Hassall & Associates Pty Ltd Report Highlights: Australians spend 30% of their food budget on takeaway or dining out. The food service sector in Australia was worth US$13.7 billion in 1998/99, accounting for around 35% of total food sales and is growing at twice the rate of retail food sales. Includes PSD changes: No Includes Trade Matrix: No Unscheduled Report Canberra [AS1], AS GAIN Report #AS0012 Page 1 of 24 This report was drafted by consultants: Hassall & Associates Pty Ltd GPO Box 4625 Sydney, NSW 1044 Tel: +61-2-9241-5655 Fax: +61-2-9241-5684 E-mail: [email protected] Disclaimer: As a number of different sources were used to collate market information for this report, there are areas in which figures are slightly different. The magnitude of the differences is, in most cases, small and the provision of the data, even though slightly different, is to provide the U.S. exporter with the best possible picture of the Australian Retail Food Sector where omission may have provided less than that. UNCLASSIFIED Foreign Agricultural Service/USDA GAIN Report # Page 1 of 24 TABLE OF CONTENTS SECTION I: MARKET SUMMARY ...........................................2 SECTION II: ROAD MAP FOR MARKET ENTRY ...............................6 A. Entry Strategy ......................................................6 B. Market Structure ....................................................7 C. Sub-sector Profiles ..................................................9 SECTION III: COMPETITION ..............................................17 SECTION IV: BEST PRODUCT PROSPECTS ..................................17 SECTION V: POST CONTACT & FURTHER INFORMATION ....................20 UNCLASSIFIED Foreign Agricultural Service/USDA GAIN Report # Page 2 of 24 SECTION I: MARKET SUMMARY The Australian food service sector consists of three main sub-sectors - Hotels and Resorts, Restaurants, and Institutional Contracts. Larger hotel and resort restaurants are increasing their profile by attracting internationally renowned chefs and developing interesting menus. A gap that existed in the fine dining sector in Australia is being filled with improvements in the quality of hotel/resort restaurants and the development of new hotels. There are many smaller hotels, which generally don’t have in-house restaurants, but exist in suburbs with a proliferation of places to eat. The restaurant sub-sector is characterized by independently owned restaurants. Within the restaurant sub-sector, the traditional fast-food chains, mainly US branded, have lost 3% market share over the last three years, partly to cafes and through the transfer of business to ethnic cuisine fast-food outlets. The institutional contract sub-sector is dominated by three main caterers/distributors. Australians spend 30% of their food budget on takeaway or dining out, spending on average US$18.86 (AUD = USD$0.64) per week on meals away from home of which US$7.70 is spent on takeaway food. A further US$5.14 is spent on non-alcoholic beverages. The food service industry served nearly 4.2 billion meals in 1998 or 222 meals per head compared with 216 in 1996, according to a study by BIS Shrapnel (1999). There is potential for substantial growth particularly if we look at the US where consumers eat out at hotels and restaurants twice as often as Australians. The study forecasts the number of meals served will increase by 4% annually over the next 2 years, with restaurants, cafes and fast-food chains reaping the benefits. The food service sector in Australia was worth US$13.7 billion in 1998/99 (AUD = USD$0.625), accounting for around 35% of total food sales, and is growing at twice the rate of retail food sales (BIS Shrapnel, 1999). The following graph provides a breakdown of the Australian Food Service market sub-sectors. Restaurants / Cafes accounted for A$7 billion (US$4.4 billion) of the market in 1998, increasing from A$6.3 billion (US$4.6 billion) in 1996-97, representing a growth rate of 11%. Australian Foodservice Sub-Sector Sales 1999 32% Restaurants/Cafes Other Fast Food 17% 16% Hotels/Clubs Major Fast Food Chains 15% 11% Self operators Caterers 7% Supermkt prepared meals 1% Source: "The Australian foodservice market 1998-2000", BIS Shrapnel UNCLASSIFIED Foreign Agricultural Service/USDA GAIN Report # Page 3 of 24 Imported foods accounted for approximately 12% of total food costs in 1998. Of the total value of food imported to Australia US imports contributed US$256 million in 1994, increasing to US$321 million in 1998 (AUD = USD$0.63). Of this, US$26 million was imported as seafood or seafood preparations in 1998. Value of Imported Food vs Domestic Products (USD Million) 1994 1995 1996 1997 1998 ROW Imported Food Products 2,299 2,534 2,620 2,569 2,370 US Imported Food Products 256 307 281 309 321 Domestic Food Products 36,265 36,994 39,165 36,056 30,650 Total value of Food Products in 38,819 39,835 42,066 38,933 33,342 Australia Source: Australian Bureau of Statistics, Cat Nos. 5422 / 5206 The food service market consists of 76,000 outlets, nine per cent more than recorded in the survey of 1996. 60,000 are commercial (restaurants, hotels, fast-food chains, clubs and cafes), and 16,000 institutional (schools, hospitals and prisons). The increase in outlets has been driven by growth in restaurants and fast-food outlets (FoodService News September 1999). The number of cafes, restaurants and bars in Australia increased from 14,000 to 20,000 in the past three years. The coffee sector is now one of the highest ranking in terms of the food industry’s annual turnover. Australia imports more than 40,000 tons of coffee annually and Australian coffee production is expanding. The distribution of the food service sector across Australia can be seen in the following chart. NSW / ACT is the leaders in all four divisions. States Share of Retail Food Sales 1998 (Percentage) States Takeaway Other Food Outlets Cafes & Supermarkets & Outlets Restaurants grocery NSW/ACT 36.9 40.9 37.1 33.2 Vic 20.8 21.3 23.8 25.4 Queensland 20.8 15.2 19.8 18.6 SA/NT 9.8 9.8 6.9 9.3 WA 9.2 11 11.7 10.8 Tas 2.4 1.8 1.2 2.7 Source: Retail World ACNielsen Report, Food Retailing, Jun 21-2July 1999, ABS 8501.0 UNCLASSIFIED Foreign Agricultural Service/USDA GAIN Report # Page 4 of 24 The key demand drivers and macro-economic factors affecting the food service sector include: • Trend towards healthy food choices: A recent consumer survey found that 78% of Australians believe diet influences health; 65% of people worry about chemicals in food; 53% worry about out-of-season produce; and more than 40% are concerned about genetic engineering. Australians are also increasing their consumption of fresh produce with fruit and vegetables accounting for 57% of total food intake. BIS Shrapnel confirmed this trend in their 1999 survey of food service operators where 51% of respondents agreed that fresh produce popularity was reducing demand for processed products. Additionally 80% of respondents agreed that customers are demanding more healthy foods (e.g. low fat, vegetarian, organic). • Emphasis on quality: Restaurants enlist dedicated suppliers to produce fruit and vegetables to their quality specifications of variety and freshness. The success of gourmet delis / sandwich bars is also based on the presentation of high quality fresh produce. • Menu diversification & ethnic diversity influencing food choices: Multiculturalism has had, and will continue to have, a major impact on the food service industry with around 75% of Australians eating ethnic foods regularly. More than 30% of first courses in restaurants in Australia can be classified as ethnic dishes. Cuisine represented includes Mediterranean, African, European, South American, South East Asian, North East Asian, Indian, and Middle Eastern. • Adventurous palates: Most Australians have traveled overseas and/or grown up in a multicultural society and as a result have been exposed to a variety of flavors. Also, Australians are developing more of a taste for spicy food using around 68% more spices in food preparation than a decade ago. • European influence: A report in ‘EuroWow!’ on the latest innovative retail concepts in Europe considers European concepts are more relevant for Australia than concepts developed in America. Restaurant menus are increasingly taking on classic French principles. • Domestic demand buoyant: Australian consumers are confident in the Australian economy due in part to growth in real incomes and employment. This has lead to an increase in disposable incomes available for dining out. • Longer working hours and two income families: Both men and women spend increasing number of hours at work dictating the trend of people looking for convenience and value for money. In the Murdoch Magazines Food in Focus study, 90% of Australians eat more than three non-home-prepared meals per week, 45% of which are eaten at home. • Internet: Food service companies including caterers, home-service, food distributors and specialist manufacturers are turning to the Internet to increase sales and improve distribution. www.nafda.com.au, www.wineplanet.com.au, www.greengrocer.com.au, and www.richmondhillcafe&larder.com.au:affiliated, are examples. • Product Innovation: Australians are prepared to try innovative foods and international chefs consider it easier to experiment in Australia and break with tradition. • Lifestyle: Eating out is playing an increasing role in socializing and entertainment. • Growth in International Conventions: Sydney, and Australia, has experienced substantial growth in the number of international conventions held partly due to an increase in advertising and appropriate venues. • Indulgence: The market is breaking down into specific segments with consumers demanding “indulgence food one day, and healthy products the next”.