By Chris Elliott, Senior Economist
(Dec. 15/16) Here’s a nice holiday treat: 2016 has been a strong year of growth for Canada’s commercial foodservice industry, with sales bounding ahead by 8.2% in September compared to September 2015. Will this joy spill over into 2017, and if not, is the Grinch to blame?
A merry 2016
Data from Statistics Canada shows there’s no lull in spending at restaurants, caterers and drinking places, despite a sharp slowdown in sales in Alberta and Saskatchewan. Over the first nine months of the year, commercial foodservice sales jumped by a solid 6.7%, thanks to gifts like an extra day in February, good weather for most of the year, more tourists due to a weak Canadian dollar, unit expansion, and a surge in consumer demand in British Columbia, Ontario and Quebec. Generally speaking, 2016 has been a banner year for the foodservice industry.
What to expect in 2017
It will be hard for the foodservice industry to maintain this pace of growth throughout 2017 — and we can’t pin that on the Grinch. Restaurants Canada’s Foodservice Industry Forecast calls for restaurant sales to grow by 4.0% in 2017. Here are the real culprits for this slowdown:
Ontarians and British Columbians end their spending spree
B.C. and Ontario have performed well over the past three years with average sales growth of 8.9% and 6.8% respectively. A healthy economy, strong consumer demand and the wealth effect from rising housing valuations have spurred restaurant spending and new unit openings. After loosening the purse strings for several years, consumers are expected to rein it in for 2017. This will slow sales to a more sustainable pace of just over 4% in the year ahead.
Less money in consumer pockets
Disposable income has a major impact on consumer spending. TD Economics forecasts that disposable income growth will slow from 3.4% in 2016 to 3.1% in 2017 and 3.0% in 2018. Cash-strapped consumers could divert more spending to grocery and lower-priced menu offerings.
Too much debt
In the third quarter of 2016, household debt as a share of disposable income jumped to a record 168%. While households are making their minimum monthly payments, it’s not sustainable to carry such a high level of debt over the long term. Canadians will look to bring down their debt in the coming years, which could mean less spending at restaurants.
Fewer gifts in 2017
Finally, many of the factors that led to stronger growth in 2016 will dissipate in 2017, including the extra day in February and the big jump in tourism.
You can still have a happy new year
Once adjusted for menu inflation, real sales will grow by 1.5% in 2017 – a pace just slightly faster than total population growth. Operators need to keep up with the latest food trends, control costs and find new ways to grow market share to remain competitive – and have a happy 2017. Signing up for the RC Show and taking advantage of the business-building tools in the Restaurants Canada Member Portal are great ways to start.