After Omicron delay, summer should help foodservice get back on track

The rise of the Omicron variant of COVID-19 has, of course, delayed what was hoped to be a year of recovery starting right from the off in 2020.

However, there is hope that a continued encouraging prognosis and a bumper summer could have the industry back on track by the second half of the year and heading into 2023.

Months of setback

Restaurants Canada’s 2022-2026 Foodservice Industry Forecast, naturally, painted a less rosy picture than its most recent Quarterly Forecast released in fall 2021.

The association’s senior economist Chris Elliott notes that at the time of the latter, nearly 80 per cent of Canada’s population was fully vaccinated and restaurants across the country were fully open without any on-premise dining restrictions and with relatively few cases of COVID-19 in the country. In addition, it was anticipated that workers would slowly return to their offices in the latter part of 2021 and into 2022.  

“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,” Elliott said.

However, since that time, the spread of the Omicron variant has shut down indoor dining completely in Ontario (which has since reopened) and Quebec and enforced 50 per cent capacity limits in many other provinces. As a result, foodservice sales in the first quarter of 2022 are forecast to fall to their lowest level since Q2 2021.

Pent-up demand

Elliott did note that one positive, particularly as indoor dining reopens again, is that there is a large amount of pent-up consumer demand out there. That is leading to Restaurants Canada forecasting improved sales in the second quarter of 2022, across all segments, compared to the first quarter. 

However, many Canadians will be cautious in returning to dining rooms. Past surveys show that about half of Canadians are eager and ready to return to restaurants immediately or within a few weeks after a lockdown, while the rest take a more reserved approach. In addition, the travel and tourism industry has not recovered to the level that was expected before Omicron surged, another limitation to foodservice’s rebound.

With patios opened, Elliott predicts that full-service restaurants will finally return to their pre-pandemic levels for the first time this summer, something that had previously been hoped would happen in the second quarter of 2022.

However, many restaurants remain on the brink as a result of the dire financial effects of the long-term pandemic.

“The variant couldn’t have come at a worse time, as bookings were cancelled and consumer confidence was shattered over the holiday season,” noted Elliott. Without further government assistance, many restaurants may well not make it through 2022. “The financial burden on restaurant owners will take years to pay off.”

Rising menu prices

Consumers and restaurants themselves should expect higher prices, warns Elliott.

Based on a survey of restaurant operators, menu prices are forecast to climb 5.2 per cent in 2022. The price of everything is going up, as noted by the recent 2022 Food Price Report, and that is no different for restaurant operators.

Elliott added that while Restaurants Canada’s 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. 

“2022 was supposed to be the year where the foodservice industry returned back to pre-pandemic levels,” concludes Elliott. “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 to $83.3 billion.”

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