Greece - The Future of Foodservice to 2021

15/09/2017 - 16:28
Despite assurances from Prime Minister Alexis Tsipras that 'the worst is clearly behind us', forecasts from international organizations such as the IMF continue to paint a pessimistic picture of Greece’s economic climate. The country remains exempt from a period of economic recovery seen across the wider Eurozone, with seemingly endless bailouts fueling sharper austerity measures.

Unemployment in Greece remains notoriously high, reaching 23.5% in 2016. Youth unemployment has remained above 40% since 2011, resulting in a ‘brain-drain’ of young, qualified Greeks seeking employment and higher standards of living elsewhere.

Greece’s recovery also continues to be hindered by a long-standing culture of tax evasion, which is often referred to in the press as the country’s ‘national sport’. Recent efforts from the governing Syriza to clamp down on this have included the mandatory installation of Point of Sale (POS) terminals across certain industries.

Profit sector summary

Between 2014 and 2016, the Greek profit sector recorded subdued value growth at a CAGR of 0.6%. The foodservice profit sector has, to a degree, evaded the steep decline experienced in other industries, due to its links to the reliably robust tourism industry. Similarly, the foodservice market enjoys somewhat inelastic demand, as Greeks remain resilient and continue to partake in regular out-of-home meal occasions.

However, the price-orientated nature of the market has become increasingly apparent. Between 2013 and 2021, average consumer spending has risen by cents rather than Euros, increasing pressure on operators.

Outlet growth has, and will remain, paralyzed both by international chains’ unwillingness to invest further in the market and the inability of potential local new entrants to secure credit from Greek banks.

Quick service restaurants summary

In 2016, Greece’s QSR market was valued at approximately EUR€ 1.5 billion, posting growth at a CAGR of 0.7% since 2014.

While the global QSR market has been widely touted as ‘recession proof’, this hasn’t proved the case in Greece. Soaring unemployment and plummeting levels of disposable income have become so severe that many consumers are neglecting to ‘trade down’ meal solutions, instead opting to ‘trade out’ of out-of-home foodservices completely.

The market’s key target audience of young urbanites has also been subdued by sustained levels of youth unemployment, which has historically hovered at around 50%. In response, operators are expected to broaden their appeal in order to attract lucrative family segments.

Uncertainty surrounding the market and wider Greece has caused a number of operators, including McDonald's, to reduce their outlet count in recent years. Despite announcing their intention to enter the Greek market in 2014, Burger King have yet to open an outlet.

Within the market, recessionary pressures have limited the levels of premiumization seen across wider Europe, with price taking precedence above all other factors.

To 2021, value growth in the channel is forecast to slow to a CAGR of 0.5%, as operators struggle to replace falling demand from younger demographics.

Full service restaurants summary

Valued at approximately EUR€ 2.8 billion in 2016, the FSR market represents the second largest foodservice channel by revenue, accounting for 21.8% of overall profit sector revenue. Although value in the channel rose at a relatively strong CAGR of 0.7% between 2014 and 2016, this can be mostly attributed to Greece’s reliably stable tourism industry.

Despite respectable value growth in recent years, the market faces the same obstacles seen across the wider profit sector, including stagnant spending and non-existent outlet growth. Most worrying, however, is the disintegration of visitor frequency, with FSR meal occasions no longer being daily, or even weekly occurrences.

Experimentation and variety within the market have been largely culled by both a tightening of belts among consumers and a reluctance to stray far from the ‘safety’ of traditional Greek cuisine among operators. The result is an uninspiring market, limping through Greece’s sharp economic downturn.

Despite low real estate prices, a ‘space race’ is unlikely to develop among operators. Incumbent operators will instead seek to squeeze every bit of revenue from existing outlets by introducing home delivery services, or by renting out their restaurants for special occasions such as birthdays or business receptions. Outlet growth is therefore expected to remain stagnant over the next five years, at a CAGR of 0.0%.

Coffee and tea shops summary

Among surveyed foodservice consumers, 63% visited a coffee or tea shop in the previous week, highlighting the relatively inelastic nature of demand in the market. For many, socializing over a Frappe or a traditional bitter coffee remains a daily ritual, despite Greece’s turbulent economic climate.

In 2016, Greece’s coffee and tea shop market was valued at EUR€ 386 million, posting growth at a CAGR of 0.3% since 2014.

Demand for out-of-home coffee remains surprisingly high, with an annual consumption of 1.1kg per capita. Although coffee shops remain busy, consumer spending is largely static. Between 2013 and 2021, average spend per transaction within the channel is forecast to rise by just EUR€ 0.03. As a result, per store earnings in the channel are among the lowest in Western Europe.

Domestic brands have weathered the economic storm better than their international counterparts. As operators such as Starbucks and Costa Coffee closed outlets or withdrew from the market entirely, local players such Café Mikel and Todaylicious saw significant growth throughout Greece’s economic downturn. International operators’ treatment of the Greek market as an extension of wider Europe contributed to this, as they failed to accommodate Greek consumers’ more rigid demands and traditional tastes.

Between 2016 and 2021, value growth in the market is expected to slow to a CAGR of 0.2%, reaching a valuation of EUR€ 390 million.

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