Limited-Service Restaurants in Indonesia

2020 IMPACT

Social distancing and official quarantine measures result in strong sales declines

2020 saw limited-service restaurants register very negative sales growth in Indonesia as the adverse impact of the COVID-19 pandemic and the official response to it resulted in all of the companies active in the channel facing extreme difficulties attracting dine-in customers. Although the very stringent quarantine restrictions that were introduced under the auspices of the large-scale social restrictions programme (PSBB) were in place for only a few weeks during the second quarter of the year, the general reluctance of consumers to socialise outside of the home due to fears of contagion cast a pall over Indonesia’s entire consumer foodservice industry throughout 2020.

Consistent availability of takeaway and delivery supports the channel’s performance

The sales declines registered in limited-service restaurants during 2020 were less severe than those recorded in other consumer foodservice channels. One of the main factors supporting the relatively favourable performance of limited-service restaurants was the fact that these outlets tend to have a far higher proportion of sales generated via takeaway and delivery orders than other types of consumer foodservice outlets.

Drive-through services and contactless card payments particularly popular in 2020

One important factor to take into consideration when assessing the relatively favourable performance of limited-service restaurants during 2020 was the fact that many of these outlets offer drive-through services. With many consumers becoming very concerned about the chances that they could come in contact with the COVID-19 virus when visiting a limited-service restaurant or other type of consumer foodservice outlet, the option to order food and receive those orders without needing to leave one’s vehicle became extremely attractive.

RECOVERY AND OPPORTUNITIES

Innovation in response to low demand likely to remain a feature of the channel

One of the most important responses of the leading players in limited-service restaurants to the low demand that they experienced due to the COVID-19 pandemic during 2020 was to constantly innovate. Whether it was innovation in terms of their food menus, their concepts and formats or their marketing campaigns, the pressure on demand that was experienced in the channel throughout the year saw the leading players in the channel continue to focus on reviewing and revising their strategies to remain relevant and mitigate the negative impact of the COVID-19 pandemic on their operations.

Widening of consumer base set to be crucial to success for Pizza Hut

Before the onset of the COVID-19 pandemic, in Indonesia Pizza Hut was a consumer foodservice brand that was primarily associated with full-service restaurants that cater to the upper-middle class. The menus were considered classier than those of its chained consumer foodservice rivals, especially those classified in limited-service restaurants, while its prices were at the higher end of the range that would be considered acceptable by most Indonesians.

Online ordering and cloud kitchens to gain further relevance

The huge increase seen in the popularity of third-party delivery services during the COVID-19 pandemic during 2020 resulted in many of the companies involved in limited-service restaurants expanding their use of cloud kitchens, which are facilities used exclusively for the preparation of online orders for delivery. In addition to the background trends that were favourable for the development of online ordering during 2020, another factor spurring the increasing consumer interest in ordering food online to be delivered were the highly effective use of promotions such as promotional pricing and food bundling, as well as the proliferation of smartphones and far higher usage of mobile internet.