Of all the major foodservice regions, Western Europe’s growth may be the most difficult to quantify. It’s a region with a wide variety of deeply ingrained dining cultures, each with unique preferences driving demand, and a lack of homogeny that makes region-wide strategies ineffective. Further, continuing economic troubles have thrown a few key markets into a tailspin, dragging down regional growth figures and camouflaging the more encouraging opportunities that are present in certain areas.
In order to get a better view of what is actually growing, one needs to look past the masking effects of negative growth categories to see only the positive. The below chart strips away negative market-level growth figures from 2012 and instead graphs gross, aggregate category growth by market. This shows which categories are actually growing, which markets are responsible for that growth, and most importantly, where the opportunities might lie for operators within the region.
All negative category growth figures at the market level were omitted from this chart. Bar length does not signify net growth in any category.
The method illustrates some key factors driving growth, the most surprising of which might be the dominant increase in Sweden, which posted both 2012’s highest absolute growth (US$696 million) and highest percentage growth (5%). The market singlehandedly drove nearly half of the region’s full-service growth and made noticeable contributions to fast food and cafés/bars, as well. In fact, along with neighbouring Norway, Sweden was the only market in the region to see net positive growth across all restaurant categories during the year, suggesting operators should take notice of what could be lucrative future opportunities in a small but thriving market.
A Bright Spot for Full-Service
The most notable aspect of Sweden’s 2012 growth is the fact that 61% of it stemmed from the full-service category, one that has struggled to find growth region-wide since throughout the review period. Indeed, many key markets like Spain, Italy and Greece saw declines as high as US$1-2 billion, and Western Europe as a whole posted a US$5.9 billion decrease.
At the opposite extreme, full-service restaurants in Sweden are thriving, based on relative economic stability and a growing trend toward dining outside the home. Annual disposable income per capita grew a healthy 3% in 2012, matched by 3% growth in consumer expenditure on food and non-alcoholic beverages. The latter has been driven by lifestyle trends and changing consumer habits, the most predominant of which has been a move toward dining out as a social pastime and more specifically, partaking in higher-quality full-service restaurant experiences.
Changing Habits Mean a Changing Market
Traditionally, Swedes do not dine out often, at least relative to other Western Europe markets. In 2012, total transactions per capita in Sweden were just 60 per year, as compared to 228 in Spain and 142 in Austria. However, this is beginning to change due to the emergence of a new quality-based “foodie” culture, in which consumers are developing a growing interest in celebrity chefs, gourmet cookbooks and cooking-based entertainment like Sveriges MasterKock, Sweden’s version of the UK’s hit series, MasterChef.
This has led to growing interest in dining out as a social activity, and in turn, Swedish restaurants are improving their offerings to cater to this new demand. Along similar lines, Western-style steakhouses and sports bars are also becoming popular social destinations, especially during major athletic events. Already in 2012, the effects of this were starting to show: Transactions per capita grew from 58 to 60 during the year, the largest jump of any market in the region, and only one of five which saw any growth at all.
Also serving to underscore these lifestyle trends was a reduction in VAT from 25% to 12% that went into effect in January, 2012. This served to lower prices considerably and gave consumers all the more reason to venture out of their home for their meals, benefiting full-service and limited-service categories alike.
“The New Food Country”
The final factor driving full-service growth in the market is a more calculated effort by the Swedish government to raise awareness about Swedish cuisine and promote Sweden as a culinary destination. Beginning in 2008, the government launched a program entitled “Det Nya Matlandet,” or “The New Food Country,” to create jobs and grow its tourism industry. Since then, over SEK1 billion (US$152 million) has been spent toward this goal, and the effects of the movement have trickled down to consumers. Along with Western-style full-service restaurants, traditional Swedish cuisine has seen a boost in popularity, as fine dining restaurants experiment with more modern versions of classic Swedish dishes.
Together, all of these trends help to explain why a small and typically low-profile market like Sweden was able to rise to the top of growth opportunities in 2012. While many other markets struggle with poor and worsening economic conditions, Sweden has remained relatively untouched by the downturn, enjoying rising incomes and high consumer confidence. Simultaneously, Sweden’s dining out culture was relatively underdeveloped, leaving plenty of room for growth amidst this new wave of interest in gourmet food.
For the sake of perspective, it should also be noted that Sweden’s growth, while impressive in the regional context, is still relatively small on a global scale. Sweden’s absolute increase in 2012 stands for less than 2% of the annual growth in China and 4% of Brazil’s. Still, it ranks impressively against some other higher-profile growth markets: At US$696 million, Sweden experienced a larger increase than the UAE (US$682 million), Saudi Arabia (US$671.7), Hong Kong (US$565) and Thailand (US$552).
As a final point of note for foodservice operators, Sweden is still largely a fragmented market, especially in full-service restaurants. While 23% of total consumer foodservice was attributed to chains in 2012, chains claimed just 6% of the full-service category, despite the presence of a number of international chains including TGI Friday’s and Pizza Hut. Within this market, no chained player claimed more than 2%, leaving plenty of room for new or existing competitors to move in and take advantage of new growth.