Case Study 11 - The Office Lunch Disruptors

Question 1

Revenue (3.3.1)

How have new entrants like The Salad Kitchen increased their revenue in London’s food-to-go market?

Answer 1

• Premium pricing: Charging £7–£12 for salads (Page 2: “Menu items… exceed £12”).
• Demand growth: Health-conscious office workers drive sales; The Salad Kitchen doubled revenue to £5mn (Page 1) and aims for £22mn in 2025 (Page 3).
• Differentiation: Customizable, high-quality ingredients attract repeat customers (“People keep coming back every day,” Page 1).

Question 2

Costs (3.3.2)

How have falling rents impacted costs for food-to-go businesses?

Answer 2

• Lower fixed costs: Rents 20% below pre-pandemic levels (Page 3) reduce overheads.
• Profit boost: Decreased average costs (AC) increase supernormal profit
• Expansion opportunities: The Salad Project secured cheaper sites previously “out of budget” (Page 3).

Question 3

Oligopoly – Non-Price Competition (3.4.4)

How do new entrants use non-price competition to challenge oligopolies like Pret?

Answer 3

• Product differentiation: “Fermented, roasted, or marinated in-house” ingredients (Page 2) and “gut health” focus (Page 2).
• Customer experience: “Design-it-yourself bowls” and lab-like stores (Page 2).
• Brand positioning: Marketing salads as a “treat” and “self-care” (Page 1).

Question 4

Contestability (3.4.7)

Is the food-to-go market contestable? Use case study evidence.

Answer 4

• Yes: New entrants (e.g., The Salad Project grew to 7 branches since 2021) exploit lower rents and niche demand (Page 3).
• Barriers: Established firms like Pret (480 UK stores) dominate, but new brands use “smaller, cheaper outlets” (Page 3).
• Threat: Pret’s suburban expansion and scale economies pose challenges (Page 3: “snapping at your heels”).

Question 5

Revenue vs. Costs (3.3.1/3.3.2)

Why do premium salad brands justify higher prices despite inflation?

Answer 5

• Cost-driven pricing: Competitors like Itsu raised prices due to “staff costs and rent” (Page 2).
• Value perception: Consumers pay more for “30 plants a week” (Page 2) and guilt-free options.
• Case study link: Salad Kitchen’s £7–£8 bowls align with office workers’ willingness to spend (Page 1).

Question 6

Oligopoly Strategies (3.4.4)

How do incumbents like Pret respond to new entrants?

Answer 6

• Expansion: Pret targets suburban areas (Page 3: “expanding rapidly outside London”).
• Product innovation: Offers noodles, broth, and rice bowls (Page 2: “salad is not the answer”).
• Scale advantages: Maintains 690 global stores to leverage brand recognition (Page 3).