Foodservice sales rise as menu inflation soars: a look at the first half of 2018

Published August 29, 2018

Canada’s commercial foodservice industry ended the first half of the year on a very positive note, with sales 6.4 per cent higher in June compared to the same month in 2017. Over the entire first six months of 2018, foodservice sales advanced by 5 per cent, thanks to higher spending at full-service restaurants (which increased by 5.6 per cent) and quick-service restaurants (which increased by 5 per cent).

Despite this remarkable rate of overall growth, most of the gains came from higher menu prices rather than increased traffic. Factoring in menu inflation of 4.3 per cent, real sales rose by a modest 0.7 per cent in the first six months of 2018. By way of comparison, real spending jumped by 3.3 per cent during the same period in 2017 and 4 per cent in 2016. If current trends continue as expected, this year the foodservice sector will experience the weakest increase in real spending since 2011.



Menu inflation soars

The rise in menu prices has been one of the most notable stories of the year so far. Due to the minimum wage increase, menu prices in Ontario jumped 6.6 per cent during the first half of 2018. This is the largest menu price increase the province has experienced since the introduction of the Goods and Services Tax in 1991. Alberta, British Columbia, Newfoundland & Labrador and New Brunswick all reported menu price increases of 3 per cent or more during the first six months of 2018, in response to higher operating costs in those provinces.

Provincial disparities widen

The foodservice industry’s performance varied significantly from province to province during the first half of the year. Robust consumer demand boosted total foodservice sales in British Columbia by 7.3 per cent, and on Prince Edward Island by 6.5 per cent; both provinces have enjoyed strong growth in recent years due to a growing population and strong economic activity.

Following several years of strong gains, commercial foodservice sales in Quebec grew by a solid 4.8 per cent in the first half of 2018, thanks to strong consumer spending at full- and quick-service restaurants. The biggest challenge in Quebec is finding enough workers to keep up with growing demand for foodservice; the lowest unemployment rate in a generation has led to severe labour shortages in the province.

Foodservice sales in Nova Scotia rose by 4.7 per cent in the first six months of 2018, as robust gains at quick-service restaurants offset softer gains at full-service restaurants and drinking places.

While Ontario’s foodservice industry reported a 6.1 per cent increase in sales in the first half of 2018, real sales dipped by 0.5 per cent. This was a sharp slowdown from an average of 4.1 per cent real growth over the previous four years.

Ontario isn’t alone — Newfoundland, New Brunswick, Saskatchewan and Alberta also reported a decline in real sales in the first six months of 2018. Newfoundland and Saskatchewan experienced a contraction in total employment, which led to a drop in real foodservice spending. Despite a stronger economy, Alberta’s foodservice industry was restrained by sluggish spending at full-service restaurants and double-digit declines in catering revenues.

Click here to access the latest Monthly Fast Facts report to learn more.

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