Summary

Australia’s food and beverage sector is evolving with significant growth in Better-For-You products and out-of-home dining. Discover key trends, market drivers, and strategies for businesses to thrive in this dynamic landscape.

Introduction

The out-of-home dining and Better-For-You categories represent two major segments of the food industry in Australia. Out-of-home dining refers to any food consumed outside the home, including restaurants, cafes, food trucks, takeout, and delivery. The Better-For-You category encompasses foods and beverages positioned as healthy, natural, organic, or providing some benefit beyond basic nutrition.

Both categories have grown tremendously in Australia in recent years, driven by changing consumer preferences and lifestyles. Australians are dining out more frequently, seeking convenience but demanding healthier, higher-quality options. This has fueled innovation in menu offerings as food service establishments adapt to meet evolving consumer demands. At the same time, many packaged food and beverage companies are reformulating products to reduce undesirable ingredients and promote Better-For-You attributes.

Understanding the dynamics of these two overlapping markets provides insights into broader shifts occurring in the Australian food landscape. This article will explore the size and key trends in the out-of-home dining and Better-For-You categories, discussing how they converge and create new opportunities within the food industry.

Definition of Out-of-Home Dining

The out-of-home dining market refers to meals and snacks prepared and consumed outside the home. This includes restaurants, cafes, bars, bakeries, food trucks, street vendors, takeaway and delivery services. Any food service establishment where customers do not prepare meals is part of the out-of-home dining market.

The key aspect of out-of-home dining is that the food is prepared in a commercial kitchen by food service professionals rather than in a private home kitchen. This covers the full spectrum, from quick service to fine dining establishments. Out-of-home dining provides convenience, saves time on cooking, and offers a wider variety of cuisines and dining experiences than home cooking alone.

Out-of-Home Dining Market Size

The out-of-home dining market in Australia is estimated to be worth over $30 billion annually. This includes all spending at restaurants, cafes, fast food outlets, pubs, clubs and takeaway food services.

According to IBISWorld, 2022, the market was valued at $31 billion, representing over 1.8% of Australia’s GDP. The market has shown steady growth over the past five years, increasing by an annualised 2.1%.

IBISWorld projects that the out-of-home dining market will reach $35 billion by 2027. This growth is driven by rising household discretionary income, busier lifestyles leading to more reliance on convenience, and strong tourism numbers propping up food services.

The restaurant industry accounts for the largest share, over 50% of Australia’s total out-of-home dining market. This includes full-service restaurants as well as cafes and coffee shops. Fast food services follow, with around 20% market share.

Out-of-Home Dining Trends

The out-of-home dining market in Australia has seen consistent growth over the past decade. Key trends shaping this market include:

• Increasing demand for convenience—Australians are busier than ever, leading to growth in convenient and quick dining options like food courts, quick-service restaurants, and takeaways.
• Premiumisation—While value remains important, consumers are trading up to higher-quality, innovative offerings. Upscale fast-casual chains and fine-dining restaurants are expanding.
• Experience-seeking – Dining out is an experience, not just a meal. Restaurants focus on creating unique ambiences, themes, and technology integration.
• Health and sustainability—Consumers want healthier, higher-quality meals with natural ingredients and sustainability practices. Plant-based menus and ethically sourced meats are popular.
• Customisation – Diners want more control over their orders. Restaurants are expanding customisable meal options and digital ordering.
• Delivery growth – Food delivery services like Uber Eats and Deliveroo have exploded in popularity. More restaurants are partnering with these platforms.
• Pop-ups – Short-term pop-up restaurants allow new concepts to test ideas and build buzz.

The out-of-home dining market reached $37 billion in 2021 and is projected to grow at 3-4% annually over the next five years. Convenience, experience-seeking, and customisation will continue shaping growth.

Definition of Better-For-You

“better-for-you” refers to healthier foods and beverages than more indulgent or traditional offerings. This category is broadly defined and encompasses products that make specific health-related claims or contain certain attributes like:

• Lower calorie or reduced sugar
• Added vitamins, minerals or nutrients
• Higher protein or fibre
• Organic, natural or non-GMO ingredients
• Free from artificial colours, flavors or preservatives

Better-for-you foods and drinks may target different needs, from weight management to digestive health. They are marketed to allow consumers to enjoy the flavours they crave while supporting their wellness goals. The better-for-you category aims to provide a middle ground between taste and nutrition. Products range from enhanced waters, yogurts, and snacks to prepared meals for specialised diets.

Better-For-You Market Size

Australia’s Better-For-You (BFY) market has steadily grown over the past decade. BFY refers to foods and beverages positioned as healthy alternatives containing positive attributes like added nutritional benefits, low calories, low fat, low sugar, etc.

According to industry reports, the BFY food and beverage market was valued at over $4 billion AUD in 2021. This represents a compound annual growth rate of around 7% from 2016. Key growth drivers include:

• Rising health consciousness amongst consumers.
• Growing rates of obesity and chronic illnesses.
• Greater demand for convenient, healthy options.

In the BFY category, products like bottled water, kombucha, plant-based meat alternatives, and high-protein snacks have grown highly. As consumers pay more attention to ingredients and nutrition labels, they are willing to pay premium prices for products perceived as healthier.

The pandemic accelerated BFY demand, as health became a top priority for consumers. With rising disposable incomes and greater investment in health and wellness, the BFY market in Australia is forecast to reach over $6 billion by 2026. Major food and beverage companies are also expanding their BFY portfolios to capitalise on this rapidly growing market segment.

Better-For-You Trends

The Better-For-You category has grown significantly as consumers become more health-conscious. This category includes foods and beverages perceived as healthier options, such as those with reduced fat, sugar, calories, or increased vitamins and nutrients.

According to industry reports, the global Better-For-You market was valued at $894 billion in 2021 and is projected to grow at a CAGR of 7.8% from 2022 to 2030. Key factors driving this growth include:

• There has been an increased consumer demand for healthy and natural products. Consumers are reading nutrition labels more closely and seeking recognisable ingredients.
• Product innovation by food and beverage companies. Many companies are reformulating products to reduce unwanted ingredients and add functional benefits. New product launches in the Better-For-You space are also increasing.
• Rising rates of obesity, diabetes, and other diet-related diseases globally. This is prompting consumers to be more health-conscious.
• Demand for plant-based and organic products continues to increase. These products align with Better-For-You positioning.

Conclusion

The out-of-home dining and Better-For-You markets in Australia are undergoing dynamic transformations driven by evolving consumer preferences and lifestyle changes. Australians are increasingly seeking convenience, premium experiences, and healthier options in their dining choices. The BFY market reflects a growing emphasis on health and wellness, with consumers willing to invest in products that balance taste with nutritional benefits. As these trends continue to develop, businesses that innovate and adapt to these demands are poised to capture significant market share. Both sectors exhibit promising growth trajectories underpinned by strong consumer interest in quality, customisation, and sustainability. This presents numerous opportunities for forward-thinking enterprises to thrive in a competitive and ever-changing landscape.

Key Takeaways for Food and Beverage Businesses

1. Health is the New Wealth: Emphasise healthier, better-for-you options by offering products lower in sugar, fat, and calories and enhanced with vitamins, minerals, and natural ingredients. Consumers are prioritising their health and wellness now more than ever.
2. Embrace Sustainability: Ensure your products and practices reflect a commitment to sustainability. Ethically sourced ingredients and eco-friendly packaging can significantly enhance your brand’s appeal.
3. Customisation is King: Allow diners to personalise their meals. Customisable options via digital ordering platforms can enhance the consumer experience and drive engagement.
4. Innovate Relentlessly: Stay ahead by constantly innovating. Whether creating new plant-based menu items or launching pop-up restaurants to test new concepts, continuous innovation can keep your brand relevant and exciting.
5. Leverage Delivery Platforms: Partner with popular food delivery services like Uber Eats and Deliveroo to reach a wider audience. Given these platforms’ growing popularity, having an efficient delivery system can significantly boost sales.
6. Convenience is Crucial: Offer products that cater to the on-the-go lifestyle. Portable, ready-to-eat, and easy-to-prepare options can capture the interest of busy consumers seeking convenience without compromising health.
7. Tap into Experience-Seeking Consumers: Create unique and memorable dining experiences beyond food. Ambience, service, and innovative menu offerings can significantly impact customer loyalty and word-of-mouth marketing.
8. Monitor Market Trends: Stay informed about emerging trends in the industry, such as the rise of functional foods or the increasing demand for organic products. Being proactive in these areas can provide a competitive edge.

Food and beverage businesses can effectively cater to modern consumer preferences and thrive in a rapidly evolving market by focusing on these key areas.