UK restaurant industry survey: How will consumers react to rising prices and calorie printing?

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restaurant survey

If managing rising supply costs wasn’t enough, the UK restaurant industry also needs to manage the impact of increased VAT and the requirement to print calories on menus this month. In preparation we asked UK consumers how they will react to price rises and calorie printing.

April 2022 sees two further impacts on the restaurant industry at a time where supplier costs continue to increase and staffing shortages persist. The first of these is a return to 20% VAT levels across hospitality exacerbating rising inflation rates which reached 6.2% in the 12 months to February. The second is the new requirement for organisations employing more than 250 staff members to print calories on their menus.

To investigate the consequences of these changes, the study focused on the relative impact on consumer behaviour of higher prices and both the introduction and increase of printed calories. In addition to testing the impact of inflation on their general spending habits, it measured changes to the respondents’ specific restaurant orders across a range of classic British menu items. Whilst restaurants might be forced to implement menu-wide price increases, for the sake of the study we only altered 50% of the menu to observe trading up as well as trading down behaviour.

Overall spending and price expectations

  • Consumer spending habits are being hit and dining out/food ordering are the areas expected to be most impacted: 90% of consumers believe the cost of living is going to rise soon with 83% indicating this is impacting their general spending habits. When asked where they will consider reducing spend, ‘Dining out in restaurants’ and ‘Ordering food for delivery’ has the highest response with 58-59% selecting these areas.
  • Around half of consumers are unaware of the VAT hike for hospitality: 54% of respondents were unaware that the reduced VAT rate (12.5% from 1st October 2021 until 31st March 2022) is ending.
  • However, consumers are currently expecting prices to increase above current inflation levels: Asked the price they’d expect a £10 item to be now compared to a year ago, the median response was £12 with answers ranging from £11.50 to £14. Therefore, the median overestimates the inflation rate as of February by 13.8%.

Restaurant pricing insights

  • Restaurant consumers indicate that they will save money on their total bill by reducing the number of courses ordered: Around 40% of those who typically order 2 courses indicated a likelihood to downgrade to just a main course. 60% of those ordering 3 courses would downgrade to fewer courses, with desserts likely to win over starters when this decision needs to be made.
  • Price increases will cause 30% of consumers to consider changing their main order: Price rises against some classic British main courses (e.g. Fish and Chips and Margherita Pizza) led 30% of consumers to consider another option on the menu. The good news for restauranteurs is that the respondents didn’t always trade down the menu, almost half of the moves were to higher priced products. Testing against the inflation rate as of December (5.4%) and an expected upper limit on price rises (10%), 16% and 18% downgraded to cheaper items respectively compared to 14% and 13% trading up to more premium purchases.
  • Also, not all price changes are equal, consumers are expected to respond to key price thresholds. For dine-in formats moves over £8/10/12 needs to be implemented with greater care than other price points.

Calorie insights

  • Consumers feel that introducing calories onto menus would have a positive impact on obesity, and overall knowledge of recommended calorie levels was high: Only 20% did not feel the change would have a positive impact. Generally, knowledge of calorie recommendations was good, with consumers able to demonstrate their knowledge of the NHS guidelines on calorie intake returning 2,000 kcals for women and 2,500 for men. Within this, consumers expect an evening meal to be around 750 calories.
  • Consumers indicate that calories being printed is likely to reduce the number of courses selected: 20-30% indicated they would reduce their total courses, around half that seen in response to price increases. Those choosing desserts are the least likely to downgrade (only 25% gave up the final course), indicating this group are least worried about the calorific size of their meal.
  • Adding calories to a menu with prices has the most impact on main course choice: 38% of respondents changed their order when presented with calorie information next to price, vs. 30% for a price increase of 5-10%. Understandably the changes tended to be healthier: 30% of respondents selected a main course with lower calories once the calorie count was depicted.
  • Knowledge of the calories in some classic British dishes is more varied though: Asked to provide acceptable corridors for calories per item, we see average calories for items such as a 12” Margherita Pizza and Fish and Chips being viewed as acceptable for around 50% of consumers. While a Chicken Caesar salad has less calories on average, it is also in line with consumer expectations for the product. On the other hand, Lasagne and Mediterranean salads have higher acceptable calories than their true calorie levels, indicating these may be products consumers ‘downgrade’ to once calories can be seen. The biggest shock to our respondents was the Cheeseburger and Chips at over 1,000 calories - this is the least acceptable to consumers and the most downgraded in the research.
  • Rising calories would have a similar impact to consumer choice as price: Across the pricing experiments 30% of consumers shifted their menu selection in response to a 5-10% price increase, the same proportion also shifted when calories are raised on the same menu items.

How should restaurants respond?

  • Know your menu dynamics: The optimal changes for any menu will be different depending on the overall brand perception, the perceived quality of the dishes, the current price levels, and the relative price of other products. Calories only add a further level of complexity. Therefore, you need to understand how consumers view changes in your context. This can be done through instore trials, but we would always recommend testing price changes through consumer research before implementing in any setting.
  • Think surgically: A blanket price increase is only likely to fail, certain dishes will be able to absorb bigger changes whereas others may already be at their peak. The biggest risk we see is the downgrade trap, without careful planning larger absolute changes are put on the top end of the menu and a disproportionate amount of customer downgrade to lower ticket items, resulting in a lower price increase than planned.
  • Consider all revenue levers: Price levels are only one lever to drive revenue, look at whether promotions can be refined, loyalty elements developed or other offers such as bundles introduced. Don’t forget to push upsell and cross-sell. The larger the cost increase which needs to be covered, the more creative the solutions need to be.
  • Consider menu engineering: There may be some instances where price increases simply cannot be achieved. The worst-case outcome is that portions reduce in size, although this is hugely risky to overall brand perception. A preferred option is to look at whether customers can be upsold to a larger/more premium version of the product to support revenue growth.
  • Assess your relative value in the restaurant eco-system: As the cost-of-living increases, different restaurants need different responses. Offerings at the lower price end will see two effects, proportions of the lower income customer groups will reduce overall spend but these are likely offset by those downgrading from fast-casual and casual dining. High priced offerings will have less of a downgrade impact and will need to use promotional and loyalty tactics carefully to maintain footfall.

Want to understand more? Reach out to Rosalind Hunter, Natasha Fisher and Ana Trifonova for an individual discussion today!

About the study: The research was conducted by Simon-Kucher & Partners directly in March 2022. The panel was arranged by Lucid Holdings UK and respondents were weighted to match a national representative data sample. The total sample covered in the research was 1,031.


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