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Restaurant diversification strategies - moving into retail

Restaurant brands are increasingly ripping up the rule book of just delivering traditional hospitality in-venue and at the table, to thinking much more holistically about the commercial opportunity to stretch their brands beyond bricks and mortar. While sound advice in the past might have been “do one thing well”, many would now agree that with the hindsight from a chain of crises, including a global pandemic, the brands that have come through on top are the ones with an omnichannel approach. In this article, I’ll share some examples of the ways restaurant brands are diversifying their revenue sources and following alternative paths to success through moving into retail.

Restaurant brand meal kits

It’s fair to say I’d possibly not have survived lockdown without the treat of the occasional meal kit from our favourite restaurant. Whether it was a sneaky Honest Burger, cheeky Dishoom Breakfast Naan or indulgent Hawksmoor steak kit, these brands delivered a little normality, and with it, joy to those dark days. Fast forward almost two years, and it’s hard to remember that the idea of the meal kit was with us before the pandemic, and there has been a lot of discussion as to whether there would be a market for this after the pandemic, when everyone got back to normality. In one way, brands hoped not as everyone in hospitality prefers full, buzzing venues over meal kits through the post. But equally, there was clearly money to be made and it was profitable, so many worked hard to retain and build their business within this billion-pound industry, created and dominated by industrial players from outside the hospitality sector.

Hawksmoor was one example, which was was quoting sales volumes of 2,500 to 3,500 meal kits a month in March 2021, and even appointed a dedicated heavyweight director to lead this division. Today, the brand is no longer promoting the offering on its website, so has presumably discontinued the service but has continued a relationship with Ocado, with branded steaks on offer via the online retailer. Industry favourite Dishoom, on the other hand, is still offering its popular Bacon Naan Meal Kits for home delivery, as is Pizza Pilgrims with its Pizza in the Post.

Celebrity chef and restaurateur Rick Stein created Stein at Home, selling both meal kits and an online fishmonger service, which is filling a gap in the market, with a decline in bricks-and-mortar fishmongers and the removal of the counters from many major supermarket chains. This project won our Restaurant Marketer & Innovator Award for Best New Product Development last year and is still going strong today.

It’s clear there will be a continued demand for such service – positioned between cooking completely from scratch and ordering a ready meal – so the question is who gets to grab that pound? Will it be industrial players like Gousto, or could it be a chance for people to enjoy their favourite brands at home? In my observation, strong and trusted restaurant brands ought not to discount this opportunity, but should consider meal kits among their strategic options.

Winning in this market is not without its challenges though, and getting it wrong risks damaging the brand and stealing valuable management attention, in addition to the purely financial risks. One challenge for operators is to balance running their restaurants and maintaining these services. We’ve seen several brands outsource the solution and others build it into their central production kitchen models. One company, Dishpatch, has offered celebrity chefs and high-end restaurants the option to partner them in retailing a limited range of dishes to be finished at home. This service has not only attracted the interest of the likes of Michel Roux Jnr, Ottolenghi, Tom Kerridge and Angela Hartnett, but also the investment community, with £10m raised in 2021.

Restaurant brand retail ranges

The power of a successful restaurant brand should not be underplayed, even when pitted against the biggest names in grocery or supermarket home brands. They not only hold their own but can often compete fiercely, even at a premium price point. The phenomenon of seeing restaurant brands on our supermarket shelves got its kickstart with PizzaExpress launching its retail pizza range in 1998, since when it’s gone from strength to strength. In 2020, the brand was reportedly selling more than 30 million pizzas in UK supermarkets each year in 4,500 outlets – nearly ten times the number of its own restaurants. Being the second most purchased ready-to-cook food in supermarkets, and with a market worth £231m a year, the chilled pizza market has attracted other players too, with Carluccio’s and Franco Manca both competing for a slice of the action. Meanwhile, casual dining brand Zizzi has opted for the frozen aisle, with a range of pizzas, pastas, sides and desserts in a Tesco tie-up. On the back of the Pizza in the Post initiative I touched on above, Pizza Pilgrims has a partnership selling pizza kits with Ocado.

Pizza as a category has laid the foundation, and many other brands have used this to build their own retail ranges and partnerships. Frozen food specialist Iceland is, perhaps surprisingly, a major player in this space, having built out exclusive supply deals with a range of the biggest names in the sector, some with entire branded freezers baring their name. These include TGI Fridays, Frankie & Benny’s, Greggs, Ed’s Easy Diner, Chiquito’s, Harry Ramsden’s & YO!

Elsewhere in the market, we see Sainsbury’s selling a range of Patisserie Valerie premium cakes (yes, PatVal lives on); Thomasina Miers’ brand Wahaca with a meal kit range; Gourmet Burger Kitchen burger kits and sauces; and even Pret with a range of cereals, bakery items and smoothie mixes. These last two are partnerships with All About Food, a company specialising in taking restaurant brands into fast moving consumer goods (FMGC). Built out of industry heavy-weight Nando’s, and starting out as the Nando’s Grocery Company, it has gone on to take the likes of Costa Coffee, Wagamama and Red’s True Barbecue on to supermarket shelves. It’s hard to look beyond its success with the Nando’s sauce range, however, which first launched into retail in 1999 and last year overtook Colman’s in sauce sales, shifting £35.9m worth of sauces last year – and that’s just here in the UK. The range is reportedly now available in more than 10,000 stores in the US and is popular elsewhere, including in Australia.

Moving from supermarkets to convenience retail, one example of a successful brand tie-up came by the way of Jamie Oliver’s partnership with forecourt operator Shell on a new to-go range in 2019. It launched to 500 filling stations across the UK with a range of 80 products, focusing on a healthier range with more fruit, vegetables and colour. Coming shortly after the collapse of Oliver’s UK restaurant group, it goes to prove that there may be power in a brand even if it's in a different format or situation.

Winning in retail is a step further away from many restaurants’ core business than offering meal kits, and getting access to shelf space requires much more than just a great product and success as a hospitality business. Suddenly, one is up against the many thousands of new products that are introduced to supermarket consumers every year, and supermarkets are themselves among the toughest buyers and partners in the retail world. If it works, it can be strong leg up for any hospitality brand – but it does require solid groundwork to succeed.

Restaurant concessions, counters and kiosks

The opportunity in retail is not just in FMCG retail ranges, as highlighted above. Having seen the incredible success of businesses like KellyDeli, the brand that partners supermarket chains with franchised sushi counters, the supermarket concession model has proven to be quite the prize, with many high street restaurant brands trying their hand – although many have also retreated quietly after fanfare launches, suggesting it’s not quite the gold rush they may have first hoped.

Going back to KellyDeli, this is a business that was founded in 2010 and really has grown at breakneck speed, with thousands of sushi and Asian food kiosks across 11 countries and with four consumer facing brands: Sushi Daily, Kelly Loves, BamTuk & TukTuk. This growth has predominantly been through supermarket counters and concessions, with the largest of these deals being with Carrefour across France, Spain and Italy. Here in the UK, it has agreements with Waitrose and Asda, and recently launched a new multi-concept brand with Tesco called Kelly’s Market offering five food concepts: CKN + BAO, Dos Mexicanas, BamTuk, My Little Dim Sum and Little Moons ice cream mochi.

Also very active in the sushi counter space is The Snowfox Group, parent company of YO! and three other brands – Snowfox, Bento and Taiko. It operated close to 6,000 kiosks back in 2020 and has since reported a near 50% jump in sales driven by its push into grocery retail and in-store kiosks. Here in the UK, the business has retail partnerships with Sainsbury’s and Tesco with its YO! Brand, and Asda, with Panku Streetfood.

Just this month, we’ve seen the announcement that Gail’s Bakery-dedicated areas are to be introduced to 64 Waitrose shops in the south and east of England, following a trial in three stores in 2022. This is the next step in a relationship founded in 2010, when the supermarket started stocking a Gail’s Bakery bread range.

Two notable examples of discontinued trials that have failed include Zizzi, which partnered with Sainsbury’s in 2017 to offer a hot, ready-to-eat pizza proposition in store, and Pret A Manger, which ended its in-store concessions partnership with Tesco after just over a year last September, having only opened one of the four planned outlets.

It’s fascinating to see how brands are constantly adapting, considering new routes to market and revenue generation opportunities. What is clear is if done properly, these brand extensions can help to solidify the brand as a high street name – not only providing direct commercial return, but also improving brand recall and authority.

First published in Propel Friday Opinion


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