Dissipating headwinds to boost F&B sales

The food and beverage (F&B) sector in Europe has faced substantial challenges in recent years, affecting operators throughout the industry. Key issues include reduced consumer spending driven by the cost of living crisis, rising finance costs that impede expansion, inflation in foodservice and energy prices, increased operational expenses, and difficulties in recruiting and retaining staff amid rising wages.

Strained economic conditions have resulted in the retail market shifting towards value-oriented shopping and trading down. This trend has enabled consumers to save on everyday essentials, freeing up funds for prioritising experiential retail. The two most prominent trends within the F&B market at present are the increasing penetration of value-oriented quick service restaurants (QSR) across Europe, and the success of brands offering premium and experiential dining experiences. As economic headwinds dissipate, eating out sales are forecast to rise by 5% in 2024 and a further 5% in 2025 in Europe.

Expanding quick service restaurants

The QSR market makes up a significant part of the F&B sector in Europe. This retail sub-segment has shown steady growth over the past few years, as consumers prioritise F&B options that cater to the increasing preference for value food on the move and quick service dine-in establishments.

The rise of franchising and new entrants (particularly from the US) has driven a flurry of activity in site acquisition and is setting the foundations for stable rental growth. This increasing penetration of QSRs across Europe is adding to the growth of the F&B market, with franchises typically emerging in eastern Europe.

The US fast food chain Wendy’s entered the UK market in 2021 and is actively seeking franchisees across Europe. Earlier this year, Wendy’s announced the signing of two new development agreements with franchisees in Ireland and Romania, and has recently announced its intention to enter the Polish market.

Similarly, US chain Popeyes recently announced a franchise agreement with leading franchisee RB Iberia to develop and grow the Popeyes brand in Italy. This agreement is driven by its European expansion strategy, with Popeyes already having a presence in Spain, Switzerland, the UK, Romania, France, and more recently, Poland and the Czech Republic.

We are also observing challenger restaurant chains looking to take market share from global brands. Belgium fried chicken chain Belchicken currently operates 48 locations across Belgium, France and Germany, and is a popular local contender to KFC. Plans for further expansion across Europe are in motion with new restaurants set to open in the Netherlands, Austria, Spain, and Italy.

Although international brands benefit from more established supply chains and extensive franchise networks, challenger restaurants are able to pique the interest of consumers looking for a newer alternative fast food option.

It is not only fried chicken QSRs that are moving the market, with coffee brands also eager to expand across the continent. The US doughnut and coffee chain Krispy Kreme has teamed up with ISH Foods to enter the German market in early 2025, with its first store scheduled to open in Berlin. Similarly, Belgian fast food chain QSRP has formed a partnership to launch the US doughnut and coffee brand Dunkin’ into France, with the first store scheduled to launch in Paris in 2025.

Premium F&B booming

Consumers in Europe are increasingly seeking high-quality food and beverage options. The trend towards experiential dining and unique culinary experiences has propelled the success of premium brands, as diners seek memorable food experiences. These premium F&B brands appeal to both local residents and tourists in search of exceptional dining experiences. To drive repeat visits after the onset of the cost of living crisis, businesses are looking to focus on key drivers such as exceptional service and unique experiences to effectively engage consumers.

Italian cuisine restaurant chain Big Mamma Group is an example of affordable experiential luxury, and currently operates 23 restaurants across France, England, Germany and Spain. The recent investment from McWin is expected to facilitate further expansion within existing markets as well as into new regions.

High-end steakhouse chain Hawksmoor is another example of a premium F&B offering that has continued to grow in light of recent challenges to the sector. The brand has expanded to a total of 13 locations with three outside of the UK. The opening in Ireland in 2023 signalled the first move into new European territory, with the other two stores opening in the US. Hawksmoor was put up for sale earlier this year as the business looks to expand its overseas presence.

Chef’s tables are another form of experiential dining. These dining experiences not only offer exceptional food but also create an experiential dining experience for guests who are willing to spend a premium on this type of F&B offering. We expect their success in the European market to grow in the next few years.

Positive growth prospects for the European F&B sector

Despite the challenges seen across the F&B sector, there are reasons to be positive for hospitality as a whole. Falling foodservice price inflation is now a clear trend, and energy costs have also fallen. Many F&B businesses have spent the last couple of years driving efficiencies across supply, front-of-house and restructuring finances to give them a surer footing going forward. There have been plenty of exciting new openings across the sector, and challenger brands to watch. Overall, we remain positive about the prospects for 2025.

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