The Battle of the Burger

31/10/2016 - 07:00
Gourmet burgers have delighted customers for over a decade but is the market getting too crowded and can fast-food operators fight back? Andrew Pring reports.

“Make me the very best burger you can. Then tell me afterwards what it’s going to cost.”

Those were the words Ben Stackhouse, chief executive of the five-strong pub company Pub Love and its sister group Burger Craft, addressed to his head chef Chris Clawson three years ago. They capture well the aspirational spirit of the gourmet burger sector that’s has been booming in the UK for over a decade now.

Top of the range beef and baps, first-class chips and a smorgasbord of premium ingredients in multiple, customizable combinations – all freshly made - are what a fast-growing number of gourmet burger operators are serving up to their delighted customers. And not just in trendy London street-food areas but right across the nation.

‘Fresh’ is the key differentiator from the traditional fast-food burger chains that McDonald’s, Burger King and Wimpey have been offering since the 1960s. As Tom Barton of the 16-strong gourmet burger chain Honest Burger says: “For a long time, burgers in this country really weren’t very good – but people accepted it. Then a number of operators came along and showed them how much better burgers can be.” Or as Horizons boss Peter Backman puts it: “There are now two burger markets – the basic burger, and the burger people are prepared to spend money on. One’s a stomach-filling exercise, the other’s an eating experience.”

Leading the burger ‘eating experience’ revolution, way back in 2001, was Gourmet Burger Kitchen (GBK). Headed up by three Kiwis who came to London and drew inspiration from the thriving New Zealand gourmet burger scene, GBK offered British diners something strikingly superior to what they’d been used to at the fast-food chains.

Others quickly followed, most notably Byron, and although they didn’t all succeed (and GBK only really took off when David Page’s Clapham House Group acquired it in 2004), customer expectations of the humble burger were elevated to new heights. In the past few years, a wave of premium burger groups have swept into London and regions beyond, a number of them well-established names from the US such as Five Guys and most recently Shake Shack and Smashburger.

With all that’s happened in the gourmet burger sector, it’s easy to get the impression better burgers are beating their fast-food burger cousins hands down and dominating the market. And it’s certainly true, as Five Guys UK managing director John Eckbert says, that “the burger sector is growing dynamically; growth in the fast-food industry has been low single figures in the past five years but premium burgers have been growing up to four times as fast. Premium has stolen all the growth.”

But premium burgers are still only about 7-10% of the £30bn UK fast food burger and chicken sector – it’s hard to measure precisely. Says Mintel’s Head of UK Food and Drink Research, Kiti Soininen: “I think it’s useful to remember that while 60% of people have visited a burger outlet in the three months to July 2016, only 7% have visited a gourmet burger outlet. The gourmet burger venues are still a small part of the total burger restaurant market. However, it is also worth remembering that ‘better burgers’ are now widely available outside specialist burger venues. For example, most leading pub groups feature these on their menus, while they are also common at American style restaurants such as TGI Fridays, and even featuring on the menu at mainstream venues like Prezzo and Café Rouge.”

Certainly, despite being vastly outsold by fast-served burgers, there’s more than enough activity in premium burgers for financiers to have smelt the sizzle and piled into the sector. The 12-unit gourmet burger group Haché has just been acquired; Honest Burger is now 51% owned by the private equity group Acquire; and last year the South African owners of Wimpey, Famous Brands, snapped up GBK.

With that kind of heavyweight backing, and a similar zeal at other owners, premium burger operators must continue to expand if they’re to meet their financial targets. But is the sector big enough to satisfy them all? And could customers tire of premium burgers and look eagerly for the next new eating experience?

John Eckbert at Five Guys is no doubt that premium burgers will be in demand for many years to come. “It’s still early days in the UK for burgers. After all, they only started in the States in the late 1940s in USA; Five Guys started in1986; Shake Shack 2004; Five Guys only made it to California two years ago. Shake Shack began as recently as 2004.

“We’re very much in tune with our customers are looking for. ‘Fresh’ is the number one food trend in the UK – all our food is freshly prepared. The number two trend is customization – people want they want, and we offer them an enormous amount of choice. So the market is definitely still evolving and growing dynamically. And the more strong players in it, the better, we think.”

Alasdair Murdoch, CEO at GBK, agrees. “I do think the market is still growing; people are continuing to migrate away from fast food and pizza.

“We’re always looking to differentiate ourselves, so that people say ‘I want to go to GBK’; and offering variety, such as vegan and vegetarian options, is a key driver as are more specials than our opposition.

“We will continue to create great restaurants, with each one individually designed, and produce amazing food. It all contributes to the feeling of value.”

Murdoch is confident that his business model is sufficiently robust to withstand any return to tougher times. “There might be a slowdown in the economy but casual dining is very resilient. A £10-15 discretionary spend will not be threatened by economic slowdown as much as high-ticket eating out.”

He adds: “Of course, there are some brands that will do well, others that won’t. We’ve had five years of sales growth; and I suppose [being bought by Famous Brands] is a vote of confidence in us and in the market as a whole.”

Honest Burger’s Tom Barton says he too is convinced there’s plenty of life ahead for premium burgers. “As long as the quality is there, people will go eating them. We’ve just invested £250,000 in our own chip factory to make sure we can continue to up the quality we offer.” Intriguingly, Honest Burger is about to launch a kebab concept using the same beef they buy for their burgers, which he says “went down a storm” at the recent Meatopia show.

Horizons’ Backman says the premium burger’s longevity cycle is impossible to predict. “No one knows – but certainly 10s and 20s of years, not one to two. Once a product gets to the top of the tree, like pizza and burgers, they don’t drop off. Burgers will still be there in 20 years. Whether the same operators are is a different matter. It’s down to how they respond to inevitable market change.”

Of course, there’s also the question of whether the fast-food brigade can do anything to get a slice of the better burger market themselves. Mintel’s Soininen points to McDonald’s launch of the Signature Collection burger range in late 2015. “That an extension of the trial to over 60 restaurants was announced in April 2016 suggests a promising early performance.

The brand also described its trial of table service launched in late 2015 as ‘successful’, leading it to accelerate the rollout. These tick a number of boxes on gourmet burger connotations. That burgers are freshly made is the quality most widely associated with a gourmet burger venue compared to a standard fast food one, 71% of people expecting this; and 47% would expect table service at a gourmet burger venue and 37% would expect burgers with a thicker patty. And there are some aspects of the gourmet proposition that the fast food operators can readily adopt, such as artisanal ingredients and thicker patties.

“McDonald’s example shows that even key aspects that consumers expect from a gourmet experience, such as freshly prepared burgers, need not be beyond the fast food operators’ reach. Having said that, finding ways to simultaneously cater for the core users visiting these venues mainly for the speed of service remains vital for the fast food venues. Quick service is the only reason to eat at a fast food venue for half of the diners at these venues, rising to three in five among the high-usage 16-24-yearolds.” And as Backman notes, “McDonald’s main priority is not trying to get people to switch from Burger and Lobster – they’re trying to bring in people who are having a Kit-Kat for lunch.”

Of course, there’s always the consumer’s “relentless demand for newness”, as Soininen describes it, adding: “It means all established cuisine types face a challenge to hold their ground against the latest trends, such as burrito venues, which have been gaining ground in London in recent years.”

But, she concludes, “Having said that, burgers by their nature have marked scope to latch onto changing trends thanks to the flexibility to use different toppings, sauces and bread types. Gourmet burger venues' continued expansion push should benefit continue to provide momentum to the segment.”

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