UTRECHT, NETHERLANDS — In Rabobank’s Foodservice Update Q3 2022, Consumer Foods Senior Analyst Maria Castroviejo warned stakeholders that “normal” growth patterns for foodservice markets are well out of sight. She expects it will take more than a few quarters until the segment begins to stabilize.
“Coupled with rising interest rates, softening equity markets and negative real wage growth, consumer confidence surveys unsurprisingly outline a worsening outlook for demand,” Castroviejo said. “It is likely that the US and Europe will both be entering a recession over the next 12 months.”
With current macroeconomic challenges, consumers’ disposable income and growth perspectives for the foodservice industry have declined. The report noted a drop in US restaurant transactions by 10% in June from a year ago, which will likely continue to deteriorate.
“Foodservices will not disappear,” Castroviejo said. “As in other occasions, the supply side will adjust. We expect more consolidation as expansion plans are being reviewed, downsizing is considered, and weaker players leave the market or are acquired by stronger players. Formats and concepts will keep evolving, as usual.”
Labor remains an issue for the US foodservice industry. Although US unemployment rates sit at 3.5% — a multidecade low — Rabobank said 1 million workers are missing from the workforce, putting restaurants in a poor position for smooth operations. Operators are also struggling to keep up with average wage increases of 8% from last year.
In Europe, the return of tourism supported market growth during the summer months, particularly in southern countries. However, Castroviejo predicted Europe would see a reversal during the last months of the year as consumers will have spent their savings accumulated from two years of lockdowns.
“Significant and generalized spending adjustments in fall seem unavoidable,” Castroviejo said. “A recession would only make such adjustments more extensive and more drastic.”
Meanwhile, China is slowly recovering from recent lockdowns, and many foodservice businesses have resumed operations. Still, Rabobank noted lower restaurant sales, predicting full-year foodservice sales to decline by 3% to 4% from the previous year.
“As foodservice is part of the discretionary sector, we expect most Chinese consumers to eat out less frequently in the term,” Castroviejo noted. “This is likely to impact foodservice growth for 2023.”