Ad Clicks : Ad Views : Ad Clicks : Ad Views : Ad Clicks : Ad Views : Ad Clicks : Ad Views : Ad Clicks : Ad Views : Ad Clicks : Ad Views : Ad Clicks : Ad Views : Ad Clicks : Ad Views : Ad Clicks : Ad Views : Ad Clicks : Ad Views : Ad Clicks : Ad Views : Ad Clicks : Ad Views : Ad Clicks : Ad Views :

Digging into the Long-Term Forecast FOR CANADIAN FOODSERVICE with Restaurants Canada’s Senior Economist, Chris Elliott

|
|

To understand Restaurants Canada’s 2022-26 Foodservice Industry Forecast, we connected with Chris Elliott, economic visionary (and resident “metalhead”) to dig a little deeper into what lies ahead for Canada’s foodservice industry. 

Let’s start with the basics. How do you go about forecasting foodservice sales, especially given all the uncertainty of this pandemic?

We use an econometric model to forecast foodservice sales. This statistical model includes economic forecasts of GDP, disposable income, retail sales and employment.

The model also includes a factor economists call “habit formation.” Essentially, past consumer spending behaviour and habits have an impact on current and future spending behaviour and habits. If I liked going out to restaurants it the past, it’s likely I’m going to enjoy going out to restaurants in the future. We see this in real life: consumer spending does not change instantaneously, but adjusts slowly over time. Unless of course, there is a pandemic. We capture that using the Bank of Canada’s stringency index.

The stringency index captures the impact of the pandemic through government containment measures, such as school and workplace closures, stay-at home orders and the severity of enforcement measures. It has been very helpful in explaining the ebbs and flows of foodservice sales throughout this pandemic. We have to acknowledge yes, there continues to be a lot of uncertainty. Events are unfolding on a day-to-day basis. This reminds me of the Paul Murdin quote: “There is no certainty in the future, only probability.” Our forecast is based on what we believe is most probable given the information we have today. As we get more information, we will update the forecast.

The Quarterly Forecast released in the early Fall of 2021 painted an optimistic picture for 2022. Your latest forecast now paints a much less rosy picture. What happened?

To understand our updated forecast, I need to take a step back to explain the underlying assumptions behind the previous forecast. At that time, nearly 80 per cent of Canada’s population was fully vaccinated, restaurants were fully opened without any on-premise dining restrictions and there were relatively few cases of COVID-19. There was a sense, maybe naively, that the worst of the pandemic was over and that the strong momentum we saw in the third quarter of 2021 would carry forward into 2022.

In addition, we also anticipated that workers would slowly return to their offices in the latter To understand Restaurants Canada’s 2022-26 Foodservice Industry Forecast, we connected with Chris Elliott, economic visionary (and resident “metalhead”) to dig a little deeper into what lies ahead for Canada’s foodservice industry. MENU SPRING 2022 7 THE CONVERSATION part of 2021 and into 2022. Not a full return, mind you, but at least two or three times a week. We also expected international travel would improve sharply in 2022 as people felt more comfortable travelling.

Of course, all of that changed with the spread of the Omicron variant.

Because of the lockdowns and on-premise dining restrictions in many parts of the country, foodservice sales in the first quarter are forecast to fall to their lowest level since Q2 2021. I don’t expect the restrictions will be in place for more than a month or two, depending on where you are in the country, but given how highly transmissible this variant is, it will take time to rebuild that consumer confidence and have guests come back out to restaurants.

Won’t foodservice sales just snap back once lockdowns are over?

In past lockdowns, we saw sales improve gradually. It’s not instantaneous. As an analogy, lockdowns are like falling off a bike. Once restrictions are lifted, it takes time to get the bike back up to speed again. So it is with consumer confidence. It takes time to get people back in the habit of dining out after a lockdown.

Even though there were no dining restrictions and patios were open in the summer of 2021, sales at full-service restaurants and drinking places did not snap back to pre-pandemic levels.

 What about the impact of pent-up consumer demand?

There is definitely a lot of pent-up demand out there. Survey after survey conducted by Restaurants Canada show that Canadians miss dining out with their friends and family. And that’s why we are forecasting improved sales in the second quarter of 2022, across all segments, compared to the first quarter of 2022.

But your new foodservice sales forecast for Q2 2022 is still a downgrade from what you were expecting in your previous forecast?

Yes, because Canadians tend to be cautious. According to past household surveys, about half of Canadians are eager and ready to return to restaurants immediately or within a few weeks after a lockdown. Others tend to take a wait and see approach. This is especially true when it comes to dining indoors or going to bars. So that hesitancy on the part of many Canadians following a lockdown is part of that downgraded outlook.

Another part reflects the delayed recovery in business dining, people returning to their offices and tourism.

But when you look at seasonally adjusted sales for the second quarter, that will bring quarterly foodservice sales back to where we were prior to Omicron.

And will the summer months be the same for foodservice sales?

With patios opened, we are forecasting that full-service restaurants will finally return to their pre-pandemic levels for the first time. So there is some positive news. Originally, we were expecting that to happen in the second quarter of 2022, but the Omicron variant delayed it by a quarter.

What are you forecasting for menu prices in 2022?

Based on our survey of restaurant operators, menu prices are forecast to climb 5.2 per cent in 2022. The price of everything is going up; it’s no different for restaurant operators. While our current operator survey found that a majority of Canadians are somewhat or very accepting of recent menu price increases, restaurant owners need to be wary. If prices rise too fast, it could lead to a decline in traffic.

What are you most concerned about for 2022?

It was a struggle for many restaurant operators to get through 2021, and the Omicron variant is really pushing a lot of owners to the brink. The variant couldn’t have come at a worse time, as bookings were canceled and consumer confidence was shattered over the holiday season. Many are continuing to go into debt, and without further government assistance, they won’t make it through 2022. So while it’s good to see sales slowly improving, the financial burden on restaurant owners will take years to pay off.

What do you look forward to the most in 2022?

Three things: getting back out to restaurants, the RC Show 22 and going to concerts. I’ve already had several metal concerts canceled due to lockdowns and Omicron, but my fingers are crossed that the concerts at the end of March won’t be canceled.

Whether it’s dining indoors at restaurants, the RC Show or going to a concert in person, it’s always a much better experience than only eating takeout or watching virtually at home. I miss the atmosphere and the energy that you can only get at a restaurant, trade show or a concert venue. That experience is something you can’t replicate at home and it’s what I’ve missed the most in the past few years.

What does the future hold for 2023? Will it get better?

Yes. 2022 was supposed to be the year where the foodservice industry returned back to pre-pandemic levels. Unfortunately, the Omicron variant has temporarily delayed that recovery. A return in consumer confidence, business dining and tourists will help Canada’s foodservice industry return to pre-pandemic levels in 2023, with annual sales forecast to rise by $83.3 billion.

Chris Elliott moderates Restaurants Canada’s State of the Industry: Future Trends and Demographics, a discussion with some of Canada’s leading data and insight providers on the Speaker Stage at RC Show 2022. Learn more and register now at www.rcshow.com

Leave a Comment

This site uses Akismet to reduce spam. Learn how your comment data is processed.