2022 Foodservice and grocery update: Challenges are lurking

Last year’s story was about how pent-up post-pandemic demand and elevated household savings would benefit foodservices (i.e., restaurants and fast food). While this played out, for the most part, it was muted by inflation. High input costs, higher borrowing costs and a difficult labour market also limited opportunities. Heading into 2023, these concerns will continue to play a major role along with slower economic growth.

Shifting demand within food
Household consumption spending in Canada has been strong in 2022. Total consumption rose 15% in Q2 compared to the inflation rate of 7.5%. Consumption of food and beverage products rose 16% and accounted for 17% of total household consumption in the quarter, a slight increase YoY. Now in Q4, there are indications that real (inflation-adjusted) spending growth is declining, but while sluggishness in the overall economy is a concern, the food sector remains robust.

Foodservice sales accounted for 34% of all food sales ten years ago. In 2019, this had increased to 37% before the COVID pandemic shifted the trend in the other direction. Now in late 2022, foodservice consumption is back to its historical trend line (Figure 1). We expect this trend to continue as consumers desire convenience, leisure and business dining opportunities; however, a weaker economy could shift spending patterns.

The split between store-bought food and foodservice expenditures in the U.S. is the opposite. U.S. consumers are now spending more of their food budget on foodservices than groceries, having reverted to the pre-COVID trend... Read More