Commercial foodservice sales are forecast to reach $75 billion next year — a 4.4 per cent increase over 2018, according to the latest Foodservice Industry Forecast from Restaurants Canada. Including non-commercial sales, total annual industry foodservice sales in Canada are projected to surpass $93 billion in 2019.
Reasons to Ring in the New Year
There are a number of reasons for foodservice operators to feel confident about the year ahead. Canada’s economy is operating at full capacity. Business and consumer confidence is on the rebound now that the leaders of the United States, Mexico and Canada have signed a new trade deal. Unemployment is low and inflation stable. All of this should provide a strong backdrop for foodservice operations in 2019.
Adjusted for menu inflation of 3 per cent, real foodservice sales in Canada are forecast to grow by 1.4 per cent next year — an improvement over 2018. While sales are projected to climb by a healthy 5.3 per cent in 2018, most of the gains have been due to rising menu prices (+4.4%) rather than increased traffic. As a result, real sales are expected to rise by a modest 0.8 per cent in 2018, representing the weakest real growth since 2011.
2018 in Review: Soaring Menu Prices Propelled Sales to Record Highs
Commercial foodservice sales increased in Canada for the 27th consecutive year in 2018. But looking at nominal sales alone tells a misleading story, as the main reason sales receipts have been getting larger is because restaurateurs have been raising their menu prices.
This has mostly been due to higher minimum wages and other increased operating costs across the country. In Ontario, menu inflation is projected to reach nearly 7 per cent by the end of 2018. This represents the province’s largest annual increase in menu prices since the introduction of the Goods and Services Tax in 1991.
The average Canadian foodservice business has a profit margin of only 4.2 per cent. When operating costs increase, restaurateurs have tough decisions to make about how to offset their losses. Usually their options are to cut down on staff or hours, or to pass cost increases on to consumers in the form of higher menu prices. In 2018, the majority of restaurateurs across Canada appeared to choose the second option.
Foodservice Sales Growth Projected to Moderate from 2019-2022
Overall foodservice sales are expected to moderate in the years ahead. After five years of solid growth of 5 per cent or more, nominal foodservice sales growth is projected to drop to 3.8 per cent by 2022. This trend is being driven by slower economic activity, softer disposable income growth and high household debt across Canada. Adjusted for expected menu inflation of 2.5 per cent, real foodservice sales are projected to rise by an average of 1.6 per cent each year during this period.
By 2022, quick-service restaurants are expected to remain the largest segment in the foodservice industry, although full-service restaurants should be a close second.
Between 2018 and 2022, Ontario and British Columbia are forecast to lead the country with the fastest foodservice sales growth. Meanwhile, demographic challenges are expected to restrain foodservice sales growth in Nova Scotia, New Brunswick and Newfoundland and Labrador.
More Insights Available in the Foodservice Industry Forecast Report
Foodservice operators can find more insights for surviving and thriving in the years ahead in the latest Foodservice Industry Forecast report from Restaurants Canada. This year’s report includes:
- Trends that are expected to dominate the foodservice market over the next five to 10 years
- A breakdown of foodservice sales by segment across Canada, and total sales by province
- Forecasts of menu inflation and topline economic indicators
The Foodservice Industry Forecast is one of many research reports available exclusively to Restaurants Canada members.
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