The changing landscape of institutional foodservice in Canada

By Geoff Wilson

Despite growth in healthcare and education, overall institutional foodservice sales in Canada declined in 2015, reflecting the significant influence that demographic, economic and even environmental factors can have on this major sector of the Canadian foodservice industry.

According to fsSTRATEGY’s newly released 2016 Canadian Institutional Foodservice Market Report, total Canadian institutional foodservice market sales declined by 6.0 per cent from $8.7 billion in 2015 to $8.2 billion in 2015 and are expected to increase by just 0.9 per cent to $8.3 billion in 2016.  Combined, 2015 contracted and self-operated institutional foodservice was estimated to account for 11.0 per cent of Canada’s $74.8-billion foodservice industry.

Contract caterers are expected to account for 45 per cent of the institutional foodservice market in 2016 (a decrease of one percentage point) while self-operated institutional foodservice will account for 55 per cent of the market.

Source: fsSTRATEGY Inc.
Source: fsSTRATEGY Inc.

Healthcare is the largest segment of the Canadian institutional foodservice marking, accounting for 52 per cent of institutional foodservice sales. Despite the significant decline in sales in 2015, the Remote segment is the second largest segment, comprising 19 per cent of institutional foodservice sales. The Education segment is the third largest, accounting for 14 per cent of institutional foodservice sales.

Retirement fuels healthcare foodservice sales growth

Institutional foodservice in the Healthcare segment includes all non-branded retail foodservice sales in cafeterias, snack bars and coffee shops as well as patient/resident meal services in facilities that provide medical services. Specifically, the Healthcare segment includes hospitals, retirement homes and long-term care facilities.

In 2015, Healthcare segment sales grew by an estimated 3.5 per cent. Sales in the Retirement sub-segment grow by 9 per cent while growth in sales in Long-Term Care and Hospitals was relatively flat. The number of Retirement beds in Canada was estimated to have grown by 7.6 per cent in 2015 while operators reported occupancy rates only declined slightly (approximately 1 per cent). For the most part, new beds were absorbed by increased demand. Foodservice costs per resident per day grew by an estimated 2.4 per cent.

Remote segment foodservice drives down total sales

The Remote catering market In Canada has been devastated by the same global economic issues that are affecting many Canadian industries and the Canadian population in general.

Remote segment foodservice sales fell by 31.5 per cent in 2015, directly attributable to a soft global economy and a glut in world oil production which has resulted in a drop in oil prices, a significant reduction of resource exploration, reductions in new resource projects, declines in head counts at remote resources sites (especially in Fort McMurray, Alberta) and growing pressure to reduce the cost of foodservices at remote sites. Remote segment foodservice sales are expected to decline a further 7.2 per cent in 2016. The recent forest fire that ravaged Fort McMurray will no doubt have some additional effects on the remote catering sub-segment.

Universities, private schools drive education segment growth

Universities command over half of foodservice sales in the Education segment. University foodservice sales grew by an estimated 4.9 per cent in 2015, driven by enrollment growth of 1.3 per cent, an increase in the number of students in residence of 2.1 per cent (which significantly drives sales due to the value of meal plans), increases in day student foodservice spending and finally a slight reduction in the use of national franchise brands whose sales are captured in Quick-Service Restaurant sales instead of the Education sector. In other words, university foodservice operators repatriated some foodservice sales from branded operations to in-house operations. Operators report this has also reduced operating expenses due to the savings in royalties and advertising fund contributions to franchisors. Despite the slight reduction, fsSTRATEGY estimates approximately 20 per cent of foodservice revenues in universities are attributable to branded franchise concepts.

Private school foodservice sales grew by an estimated 8.0 per cent in 2015, supported by enrollment growth estimated at 3.8 per cent (especially in Ontario and Western Canada) and increases in per diem sales. Nevertheless, operators report significant pressure from parents is likely to dampen per diem price increases in 2016 and enrollments are expected to be flat.

Business dining

Business Dining sector foodservice sales were estimated to have declined by 6.9 per cent in 2015 due to reduction in populations and the number of offices and plants offering foodservices. Nevertheless, contractors who service the majority of the Business Dining segment managed to increase average sales per capita through menu and operational innovations.

Key trends in institutional foodservice

Demand for fresh, healthy and local/sustainable food is growing in institutional foodservice. Employees in healthcare and business offices as well as students in educational facilities are seeking healthier foods, particularly as they frequent these establishments regularly and the dining is not always a treat occasion. In fact, students in universities have led the demand for fresh and local foods, challenging foodservice operators to blaze the trail for sustainable foodservice.

Students in universities are demanding longer service hours to accommodate their varying schedules. The days of three square meals a day are gone. Students want to eat what they want, where they want and when they want. Students see dining as a cultural experience, blended with socialization and learning.

As baby boomers enter the retirement market, they are demanding more flexible dining times as well as a variety of dining experiences. Operators are exploring the use of a la carte dining as an alternative to service of three meals a day in traditional dining rooms. Food is a key marketing tool for retirement residences; operators are elevating the calibre of their culinary teams and their foodservice offers to compete for residents.

Change and flexibility is the new normal

So, while institutional foodservice sales declined in 2015 due to the downturn in the resources segment, institutional foodservice continues to evolve. Successful operators are changing the way they do business to meet the evolving demands of their customers. The industry continues to demonstrate its resourcefulness and flexibility.


About the author:

Geoff Wilson is a Principal with fsSTRATEGY Inc., a niche consulting firm providing advisory services for the hospitality industry with a significant focus on the foodservice sector. For more information on the 2016 Canadian Institutional Foodservice Market Report, contact nextsteps@fsSTRATEGY.com.

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