High debt to weaken Canadian foodservice industry’s sales growth

26th April 2018 (Last Updated April 26th, 2018 16:35)

A study conducted by the Conference Board of Canada has shown that sales growth in the foodservice industry will reduce over the next five years due to high consumer debt levels.

High debt to weaken Canadian foodservice industry’s sales growth
Restaurants Canada 2018 Foodservice Facts report identified that millennials were one of the driving factors in foodservice sales.

A study conducted by the Conference Board of Canada has shown that sales growth in the foodservice industry will reduce over the next five years due to high consumer debt levels.

The ‘Canadian Industrial Outlook: Food Services’ study also states that restaurant sales will see an average growth of 1.4% annually between 2018 and 2022 and pre-tax profits of the foodservice industry are expected grow by 3.4% to reach $1.9bn this year.

The Conference Board of Canada industrial economic trends director Michael Burt said: “Canadians’ ability to spend will be squeezed not just by high debt levels, but by rising interest rates that will increase the cost of servicing their debt.

“This will leave Canadians with less disposable income and likely diminish their willingness to dine out.”

“Increase in the adoption of technologies such as mobile pre-ordering platforms and interest in data-driven business will drive operational efficiency.”

However, restaurant operators will benefit from the price deflation at grocery stores last year due to aggressive discounting practices by Canadian food retailers.

Full-service restaurants will face challenges as the competition in the industry will soar high due to weaker sales growth and increase in demand for new trends such as meal-kits.

The study also predicts that the financial performance of the industry will stay healthy despite moderating sales growth.

Industry labour costs will increase due to minimum wage hikes in Ontario and Alberta resulting in around 6,000 job cuts this year and the next.

Meanwhile, the report adds that increase in the adoption of technologies such as mobile pre-ordering platforms and interest in data-driven business will drive operational efficiency.

Labour productivity gains will help in reducing the negative impact on revenues of slower growth in customer visits.