OTTAWA, Ontario – Foodservice operators in Canada face market headwinds similar to those weighing on the foodservice industry in the United States.
Increasing competition coupled with weak consumer spending will drag on revenue growth for Canadian restaurants, The Conference Board of Canada said in its Canadian Industrial Outlook: Canada’s Food Services Industry. The report is forecasting revenue growth of 3.9 percent in 2017.
The report states that weak income growth will weigh on consumer spending and curb expansion in restaurant traffic. Additionally, The Conference Board said the number of restaurants in Canada has grown at a rate of 1.8 percent per year since 2011, exceeding the 1.1 percent growth in total population. Finally, steady price growth at restaurants and lower prices at grocery stores may lead more consumers to eat meals at home. The board said restaurant prices grew by 2.3 percent in December 2016 while grocery prices eased by 2.8 percent. These factors are expected to spur the fight for market share.
“As restaurants vie for Canadians’ food dollars, they will not only be competing against each other for market share, but with grocery stores as well,” Michael Burt, director, Industrial Economic Trends, The Conference Board of Canada, said in a statement. “Dining at home is becoming relatively attractive compared with eating out, given slower growth in income and the fact that prices at restaurants have steadily risen despite a drop in grocery prices over the last year.
“Increased competition in the industry may drive the less-profitable independent restaurants out of business as they struggle to compete with chains on food prices and keeping up with food trends,” Burt concluded.
Over the long-term, according to the report, the Canadian dollar is expected to strengthen, which likely will slow growth in spending from international and domestic customers.
But the Conference Board of Canada’s outlook also uncovered good news for the Canadian foodservice industry. Breakfast is becoming an increasingly important daypart for the industry. Breakfast traffic grew by 6.3 percent in 2016 and now accounts for just under one-in-five restaurant visits. Restaurants in Canada are capitalizing on the trend by offering all-day breakfast options, similar to quick-service restaurants in the US.
Also, Canada is celebrating its 150th anniversary of Confederation and Montreal’s 375th anniversary of its founding. Tourism, including foodservice operators, should benefit from these landmark occasions, according to the board.
Pre-tax profits in the food services industry are forecast to reach C$1.6 billion in 2017, while pre-tax profits in the food manufacturing industry are forecast to climb to C$4.2 billion. Canada’s food manufacturing industry is forecast to grow 2.4 percent in 2017.