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Why are Pakistanis spending 40% of their income on readymade food?
AYESHA SHAIKH | ANUSHA ZAHID
Pakistanis are eating out more often than ever before and for a wider range of occasions. This fundamental shift, driven by demographic and consumer trends, has led to considerable market growth in the restaurant sector in recent years.
Gone are the days when hours would be spent meticulously planning lavish, home-cooked feasts for guests invited to lunch or dinner. The concept of dining out was alien, particularly among the middle-class. In fact, it was considered inappropriate not to offer guests food that was prepared at home. Yet, today, Pakistanis are estimated to be spending in excess of Rs 114.78 billion on eating out annually, a figure which is higher than all other developing countries. This is not surprising given that according to State Bank of Pakistan statistics, Pakistanis are spending almost 40% of their income on readymade food.
To identify the factors fuelling the growth of the dining industry, Aurora spoke to the founders of several restaurants, eateries and cafés. There was unanimous consent on two points. First, the landscape of eateries is now more diversified and dynamic than ever before. Second, the exponential growth of the industry has been triggered by changing population demographics and psychographics, the ubiquitous influence of technology, higher disposable incomes of a growing middle-class and the increasing proportion of Millennials in the workforce.
CHANGING LIFESTYLES
From a consumer perspective, compared to a decade ago, when dining out was restricted to special occasions, it has now become more of a leisure activity and a reason to socialise – whether it is after school, after work, or as a family. Moreover, with an increasing number of nuclear families in urban centres and more women entering the workforce, there is less time (and inclination) to cook every day.
Adding to these factors, Humaira Sattar, co-Founder, Café Aylanto and Fuschia, says that eating out has become a norm, as it offers people a much-needed avenue of entertainment and de-stressing. She is of the view that since time is precious, eating out has become an enjoyable social experience. Even when it comes to entertaining guests, people prefer to do so at a restaurant to avoid the hassle of cooking at home, getting out the cutlery and cleaning up afterwards. She highlights another significant reason for this change. “People used to live in houses with terraces, verandas and open spaces suited to hosting gatherings. With real estate becoming more expensive and the population boom, more people in urban areas are living in flats that have a limited covered area, where it is almost impossible to invite large groups of friends and family members.”
Given that the Millennials represent too large and lucrative a market segment to be ignored, adding delivery services became a necessity. According to industry stakeholders, this is what has led to the home delivery service becoming a standard now, otherwise eateries risk losing out on substantial revenues.
It is not just the increased frequency of dining out that has contributed to the boom in the industry. An important change has been the broadening of the customer base. Until about a decade ago, it was high net worth, middle-aged and discerning individuals who were the real cash cow for the restaurant industry. Today, restaurants are catering to not only this segment, but to a wider cross-section of society, both in terms of age groups and income levels.
Mohsin Ihsan, co-Founder, Cosmopolitan, points out that urban Pakistani Millennials form an integral part of the restaurants’ customer base. “Young people want a cool and hip place to hang out and experiment with new kinds of food and drink.”
Hussain Tariq, COO, Chatterbox Deli, best explains how the increased diversity of the target audience has resulted in restaurants adding variety to their menus. “Our salads and sandwiches from the on-the-go section are usually bought by working professionals or health-conscious customers; our retail section has products sourced from home businesses, which include aslee ghee or good quality kheer that is difficult to find elsewhere, while our dessert section is exclusively targeted towards high-end customers.”
A pertinent question to ask at this point is if the customers are so different, to what extent does pricing effect business? All founders agreed that since the competition is intense and customers come from different income groups, a large part of the target audience is price-sensitive. Restaurateurs mostly divide customers into two distinct groups. The first comprises brand loyal customers who are the regulars. These people appreciate quality food and ambience, and are willing to pay more if a restaurant meets their expectations. The second group constitutes customers who want value for money and are always on the lookout for more affordable options. The first group is the one that restaurants want to keep satisfied because as Sattar points out, “restaurants cannot survive without brand loyalty.”
Fouzia Siddiqui, Founder, FLOC, goes so far as to say that even with a limited number of loyal customers, an eatery can thrive. She points towards a hospitality research which stated that 75% people who eat at a restaurant more than twice are likely to keep returning. “More than 60% of the people you see at FLOC are our regular customers. It is crucial for restaurants and cafés to focus on continuous innovation and service quality as these are the keys to retaining value-conscious customers.”
Siddiqui also pointed out that since globalisation and the pervasiveness of technology have exposed a larger section of the population to international trends, it is no longer sufficient to provide a fulfilling dine-in experience only. To optimise sales, the dining industry must look at alternative means of connecting with their customers and ensure that food is available where people want to consume it.
THE RISE OF OFF-SITE DINING
If ‘experience’ is important for consumers when making most purchase decisions, including food choices, then ‘convenience’ is a close second. While there is no questioning this generation’s love for hanging out and snacking, a Mintel 2015 research revealed that Millennials are more likely than previous generations to prioritise convenience above all else. Initially, the concept of home delivery of restaurant food in Pakistan was restricted to large fast food chains, most of which were franchises such as McDonald’s, KFC and Pizza Hut. This was primarily because adding delivery services entailed a substantial investment in terms of acquiring a fleet of delivery vehicles as well as riders, which was not always feasible for small scale restaurants that did not receive sufficient delivery orders. However, over the years, an increasing number of fine-dining restaurants and even smaller eateries began offering home delivery services, even though this represented a significant addition to the fixed costs of the business. The reason for this strategic change was the realisation that the demand for quality prepared food stemmed from a growing need for convenience, particularly from Millennials, who are less willing to cook and clean up afterwards. Given that the Millennials represent too large and lucrative a market segment to be ignored, adding delivery services became a necessity. According to industry stakeholders, this is what has led to the home delivery service becoming a standard now, otherwise eateries risk losing out on substantial revenues.
This change in consumer preferences has not gone unnoticed by the restaurant industry. A case in point is the recent launch of Chatterbox Deli. According to Naila Naqvi (who previously established Pie In The Sky, Café Chatterbox and Aztec), Founder & CEO, Chatterbox Deli, “what makes this enterprise different from the previous ones is that we now have a designated, ready-to-eat menu for working professionals with a hectic schedule and who want quality and hassle-free food. There is a separate menu for dine-in customers; the differentiating factor is that people have the option of walking in, choosing from a variety of healthy, ready-to-eat food options, and walking out within minutes.”
Although there have been instances of biased comments and unwarranted criticism posted on digital, there seems to be consensus among restaurant owners that the trend of sharing dining experiences online keeps them focused on providing consistent quality, day in and day out.
AYESHA SHAIKH | ANUSHA ZAHID
Pakistanis are eating out more often than ever before and for a wider range of occasions. This fundamental shift, driven by demographic and consumer trends, has led to considerable market growth in the restaurant sector in recent years.
Gone are the days when hours would be spent meticulously planning lavish, home-cooked feasts for guests invited to lunch or dinner. The concept of dining out was alien, particularly among the middle-class. In fact, it was considered inappropriate not to offer guests food that was prepared at home. Yet, today, Pakistanis are estimated to be spending in excess of Rs 114.78 billion on eating out annually, a figure which is higher than all other developing countries. This is not surprising given that according to State Bank of Pakistan statistics, Pakistanis are spending almost 40% of their income on readymade food.
To identify the factors fuelling the growth of the dining industry, Aurora spoke to the founders of several restaurants, eateries and cafés. There was unanimous consent on two points. First, the landscape of eateries is now more diversified and dynamic than ever before. Second, the exponential growth of the industry has been triggered by changing population demographics and psychographics, the ubiquitous influence of technology, higher disposable incomes of a growing middle-class and the increasing proportion of Millennials in the workforce.
CHANGING LIFESTYLES
From a consumer perspective, compared to a decade ago, when dining out was restricted to special occasions, it has now become more of a leisure activity and a reason to socialise – whether it is after school, after work, or as a family. Moreover, with an increasing number of nuclear families in urban centres and more women entering the workforce, there is less time (and inclination) to cook every day.
Adding to these factors, Humaira Sattar, co-Founder, Café Aylanto and Fuschia, says that eating out has become a norm, as it offers people a much-needed avenue of entertainment and de-stressing. She is of the view that since time is precious, eating out has become an enjoyable social experience. Even when it comes to entertaining guests, people prefer to do so at a restaurant to avoid the hassle of cooking at home, getting out the cutlery and cleaning up afterwards. She highlights another significant reason for this change. “People used to live in houses with terraces, verandas and open spaces suited to hosting gatherings. With real estate becoming more expensive and the population boom, more people in urban areas are living in flats that have a limited covered area, where it is almost impossible to invite large groups of friends and family members.”
Given that the Millennials represent too large and lucrative a market segment to be ignored, adding delivery services became a necessity. According to industry stakeholders, this is what has led to the home delivery service becoming a standard now, otherwise eateries risk losing out on substantial revenues.
It is not just the increased frequency of dining out that has contributed to the boom in the industry. An important change has been the broadening of the customer base. Until about a decade ago, it was high net worth, middle-aged and discerning individuals who were the real cash cow for the restaurant industry. Today, restaurants are catering to not only this segment, but to a wider cross-section of society, both in terms of age groups and income levels.
Mohsin Ihsan, co-Founder, Cosmopolitan, points out that urban Pakistani Millennials form an integral part of the restaurants’ customer base. “Young people want a cool and hip place to hang out and experiment with new kinds of food and drink.”
Hussain Tariq, COO, Chatterbox Deli, best explains how the increased diversity of the target audience has resulted in restaurants adding variety to their menus. “Our salads and sandwiches from the on-the-go section are usually bought by working professionals or health-conscious customers; our retail section has products sourced from home businesses, which include aslee ghee or good quality kheer that is difficult to find elsewhere, while our dessert section is exclusively targeted towards high-end customers.”
A pertinent question to ask at this point is if the customers are so different, to what extent does pricing effect business? All founders agreed that since the competition is intense and customers come from different income groups, a large part of the target audience is price-sensitive. Restaurateurs mostly divide customers into two distinct groups. The first comprises brand loyal customers who are the regulars. These people appreciate quality food and ambience, and are willing to pay more if a restaurant meets their expectations. The second group constitutes customers who want value for money and are always on the lookout for more affordable options. The first group is the one that restaurants want to keep satisfied because as Sattar points out, “restaurants cannot survive without brand loyalty.”
Fouzia Siddiqui, Founder, FLOC, goes so far as to say that even with a limited number of loyal customers, an eatery can thrive. She points towards a hospitality research which stated that 75% people who eat at a restaurant more than twice are likely to keep returning. “More than 60% of the people you see at FLOC are our regular customers. It is crucial for restaurants and cafés to focus on continuous innovation and service quality as these are the keys to retaining value-conscious customers.”
Siddiqui also pointed out that since globalisation and the pervasiveness of technology have exposed a larger section of the population to international trends, it is no longer sufficient to provide a fulfilling dine-in experience only. To optimise sales, the dining industry must look at alternative means of connecting with their customers and ensure that food is available where people want to consume it.
THE RISE OF OFF-SITE DINING
If ‘experience’ is important for consumers when making most purchase decisions, including food choices, then ‘convenience’ is a close second. While there is no questioning this generation’s love for hanging out and snacking, a Mintel 2015 research revealed that Millennials are more likely than previous generations to prioritise convenience above all else. Initially, the concept of home delivery of restaurant food in Pakistan was restricted to large fast food chains, most of which were franchises such as McDonald’s, KFC and Pizza Hut. This was primarily because adding delivery services entailed a substantial investment in terms of acquiring a fleet of delivery vehicles as well as riders, which was not always feasible for small scale restaurants that did not receive sufficient delivery orders. However, over the years, an increasing number of fine-dining restaurants and even smaller eateries began offering home delivery services, even though this represented a significant addition to the fixed costs of the business. The reason for this strategic change was the realisation that the demand for quality prepared food stemmed from a growing need for convenience, particularly from Millennials, who are less willing to cook and clean up afterwards. Given that the Millennials represent too large and lucrative a market segment to be ignored, adding delivery services became a necessity. According to industry stakeholders, this is what has led to the home delivery service becoming a standard now, otherwise eateries risk losing out on substantial revenues.
This change in consumer preferences has not gone unnoticed by the restaurant industry. A case in point is the recent launch of Chatterbox Deli. According to Naila Naqvi (who previously established Pie In The Sky, Café Chatterbox and Aztec), Founder & CEO, Chatterbox Deli, “what makes this enterprise different from the previous ones is that we now have a designated, ready-to-eat menu for working professionals with a hectic schedule and who want quality and hassle-free food. There is a separate menu for dine-in customers; the differentiating factor is that people have the option of walking in, choosing from a variety of healthy, ready-to-eat food options, and walking out within minutes.”
Although there have been instances of biased comments and unwarranted criticism posted on digital, there seems to be consensus among restaurant owners that the trend of sharing dining experiences online keeps them focused on providing consistent quality, day in and day out.
