Conference Board sees challenges and good signs for foodservice

OTTAWA—While lower raw material prices expected for this year may help keep foodservice operators’ costs down, in the long term food prices are expected to continue going up, according to the Conference Board of Canada.

At the same time, a number of signs are positive for the future of the industry.

In its Canadian Industrial Outlook-Winter 2012 report, the Conference Board says the tight labour market will also add pressure on wages.

“Even though food service operators are hesitant to pass through the rising costs to customers, they may have to do so to stay profitable,” says a Conference Board release.

“Increased cost pressures can be attributed to the high prices for agriculture commodities and oil.”

Along with this, says the board’s report, modest employment gains and weak personal disposable income growth for Canadians means consumers will not giving the foodservice industry much support. Real GDP is projected to rise 1.9 per cent this year.

On the other hand, tourism spending is going up, bringing more demand for foodservice. There is notable growth in business from non-U.S. foreign visitors but most of the increase has been from Canadians travelling in their own country.

The board says that since the economic downturn of 2008–09, the foodservice industry has managed to increase revenues and profits. Industry revenues rose 4.5 per cent in 2011, the fastest increase since 2005. This was due to both increased menu prices and greater sales volume.

Although “risks to the near-term outlook remain” the industry is supported by strong fundamentals. The board says the Canadian economy is expected to benefit from a stronger U.S. economy, starting next year.

One positive result of the global recession in 2008–09 is that foodservice operators were forced to look for ways to increase efficiency and productivity. In this search for better ways to operate, restaurants have become more computerized, with POS systems, tracking orders and inventory to make sure they match up properly, and managing patron seating.

Computers are also more efficient in keeping track of employee schedules and pay.

Operators are becoming more flexible with their service. For instance, takeout is now routinely offered by full-service establishments, and restaurants are taking orders by fax or Internet and offering more menu items in conveniently-sized portions.

Grocery stores are becoming more competitive in the foodservice market. The Conference Board estimates that, with grocers doing more business in this area, the foodservice industry’s share of the total food dollar will go down slightly from 32.5 per cent last year to 32.4 per cent in 2012.

The board suggests that “to maintain their share of consumers’ food dollars, restaurants must enhance their value proposition by focusing on quality while keeping prices competitive.”

For more information about the Conference Board and its studies go to www.conferenceboard.ca.