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COVID-19 accelerates off-premise, tech and home-region growth trends among International Top 25

Coming year may see fewer European brands on the roster as Asia market stars step up

Prior to 2020, the global restaurant industry was already in a state of major tumult, with delivery and smartphones remapping the way consumers interact with foodservice.

Increasingly on the radar of the tech industry and many of the world’s largest investment funds, the industry was (and still is) poised for a major shift, with hundreds of millions of dine-in occasions migrating to other formats — delivery above all — but also takeaway, drive-thru and even vending machines. COVID-19 has only accelerated those trends, while also creating an unprecedented crisis of demand.

Most major markets are projected to weather 20-30% full-year sales declines in 2020. While chains have on average outperformed independent restaurants this year, owing to greater resources and the ability to leverage multiple service models such as drive-thru or delivery, 2020 has nonetheless been incredibly challenging. Every publicly-traded company in the International Top 25 recorded sales declines in the first half of 2020, with U.K.-based operators especially hard-hit. In the first half of 2020, U.K. baked goods chain Gregg’s reported same-store sales declines of nearly 50% through company-owned outlets, while sandwich chain Pret a Manger reported a 60% contraction versus 2019.

Though there are few, if any, real bright spots, the outlook is somewhat less dire elsewhere, above all in Asia. Chinese operators in the Top 25 have reported signs of recovery, with results in the first half of 2020 less negative than in other markets.

Hotpot chain Haidilao, for instance, reported a 17% drop in revenues in the first half of 2020, though delivery sales nearly tripled, with signs of growth returning to China in the third quarter. As in previous years, many of the chains in the International Top 25 are concentrated in a particular market or region, with few truly global operators akin to a McDonald’s or a YUM Brands. Instead, Asia is the primary market for most players in the Top 25, with 19 of 25 based there, 11 of which are headquartered in Japan.

Going forward, this emphasis on Asia is set to intensify. China’s domestic restaurant market, already the largest in the world by total sales, continues to expand, while the highly effective response to COVID-19 there and in other Asian markets like South Korea, Taiwan, Vietnam, and to a lesser extent Japan, is likely to mean a much more robust recovery in 2021 relative to other regions.

According to Euromonitor International, both Taiwan and South Korea are projected to see full-year 2020 sales declines in the low single digits to middle-single digits, a far better performance than any other market, followed by a strong recovery in 2021.

Both Japan and China are expected to weather 2020 declines of around 15%, with far stronger 2021 recoveries than more severely-impacted markets like the U.S., U.K. or Brazil. For many of the players in the International Top 25, this is likely to drive even more focus on local markets; while a number of Japanese brands, such as sushi chain Kura, have made tentative moves into North America, this can be expected to pull back in the near term, particularly as growth numbers in Asia improve.

To be clear, this represents an acceleration of an existing trend, not a complete shift; in China in particular, consumer preferences for local brands have been growing steadily for much of the last decade. Native tech and delivery platforms like Alibaba and Meituan Dianping in China and Grab and Gojek in Southeast Asia are both massively popular and increasingly distinct in terms of look and feel from American and European platforms like Uber and Just-Eat/ These platforms often combine delivery service with payments platforms, restaurant reviews and more, encompassing far more daily transactions for regular users.

In markets like China and Indonesia, where credit card usage remains low, e-commerce platforms tied to payments systems have captured a substantial share of overall spending while cementing online commerce (and by extension delivery) as a fundamental part of life for young, urban consumers.

Rather than completely altering consumer eating habits, what COVID-19 has done is bring many trends forward by three to five years, radically boosting spending on takeout and delivery in most markets whilst further raising the profile of Asian consumers. Many of these shifts are expected to stick; a 2021 version of the International Top 25 will likely include three to four fewer European operators, replaced by better-performing Asian operators, according to 3Q 2020 results.

Likewise, delivery and takeaway innovation can be expected to continue, as investments in smartphone ordering and other “low-contact” consumer interactions expand. Already the site of surging smartphone usage, Asia is expected to lead the way here, owing in part to a proportionally smaller, modern chained restaurant sector in markets like India, Indonesia and even China.

In these markets, new innovations in ordering and service formats can be expected to take root quickly, as new operators incorporate the latest technology to reach a new generation of digitally native consumers.

Michael Schaefer is global lead, Food & Beverages, for Euromonitor International.

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