Canadian foodservice

Canadian foodservice started 2022 better than expected, but economy threatens future

The first quarter of 2022 saw the Canadian foodservice industry perform better than expected, according to Restaurants Canada’s Quarterly Forecast, although that report comes with a warning about the likely economic conditions of the next year.

Canada’s commercial foodservice industry began the year with a higher-than-expected $16.3 billion in sales in Q1 2022, found the report, above the previous forecast of $15.2 billion.

While the Omicron variant had a devastating impact on foodservice sales in January 2022, a faster-than-expected decline in cases and loosening of on-premise dining restrictions, combined with pent-up demand from consumers, led to a sharp rebound in sales in February and March.

In fact, seasonally adjusted sales in March 2022 returned to their pre-pandemic levels for the first time in two years. Total commercial sales were just four per cent below pre-pandemic levels in Q1 2022, instead of the previously forecast 11 per cent below.

Menu inflation accelerated to 4.7 per cent in Q1 2022 compared to 2.8 per cent in Q1 2021, which also contributed to higher overall sales.

At the segment level, drinking place sales performed as forecast, while full-service restaurants and caterers reported higher-than-expected sales. Meanwhile, quick-service restaurant sales were eight per cent higher in Q1 2022 than they were in Q1 2019 due to solid consumer spending.

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Cautious optimism for what’s ahead

As a result of the better-than-expected first quarter, Restaurants Canada has revised its forecast for total commercial foodservice sales for 2022. Annual commercial foodservice sales are now expected to grow to $79.5 billion in 2022, up three per cent over 2019 levels. By comparison, the previous forecast called for annual sales of $76.3 billion (down roughly one per cent compared to 2019 levels).

While the 2022 commercial Canadian foodservice industry is forecast to return back to pre-pandemic levels, once adjusted for menu inflation, annual real sales in 2022 are forecast to remain eight per cent below 2019 levels.

In 2023, Canada’s foodservice industry is forecast to grow to $84.8 billion, representing a 6.7 per cent increase over 2022.

Economic outlook creates a threat

Ultimately, though, while the Canadian foodservice industry’s performance in Q1 2022 has offered reason for cautious optimism, the forecast for the remainder of the year and for 2023 may have to be revised depending on how the economic situation in the country develops.

In particular, greater inflation, rising interest rates, and growing concern about a possible recession in the future could lead to a moderation in foodservice spending.

Restaurants Canada warns that an Angus Reid survey conducted between May 19-24, 2022 found that 76 per cent of Canadians believe the country is heading towards or already in the midst of a recession. Overall, 85 per cent are concerned about the current state of the economy. Nearly half of Canadians also think the economy will be worse or much worse off a
year from now.

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Restaurants Canada found that one-third (32 per cent) of respondents said they would visit quick-service restaurants “a lot less often” due to the increased cost of living. For table-service restaurants, this figure rises to 37 per cent. And another 36 per cent of respondents said they would order from a quick-service restaurant or table-service restaurant “a little less often”, found the report.