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Retail foodservice is the fastest-growing foodservice segment in Canada

Canadians under 40 are taking the biggest bite out of the country’s restaurant business, while showing an appetite for environmentally sustainable operations and menu options. Plant-based protein, sustainable seafood and locally sourced food are in demand, while plastic straws continue to disappear, according to the 2019 Foodservice Facts report just released by Restaurants Canada.

This information is also valuable to the convenience sector, which is increasingly diversifying its offerings to include foodservice for busy customers on the go. The report found that retail foodservice (prepared meals in department stores, convenience stores and grocery stores) remains the fastest-growing foodservice segment in Canada, with projected annual sales increasing by 6.2% to $2.9 billion in 2019.

The report credits Millennials (27-42 years old) and generation Z (19-26 years old) for helping to grow overall foodservice sales by 5.1% in 2018, driving sales to nearly $90 billion. This marks five consecutive years of growth exceeding 5%, which, according to Restaurants Canada, makes Canada’s foodservice industry the fastest-growing sector in the country during the past decade.

The report reveals:

  • 79% of Gen-Z consumers and 71% of Millennials order food or beverages from a restaurant at least once a week or more.
  • Consumers under 30 years old spend 44% of their food dollar on food and alcohol from restaurants, compared to 35% for those between the ages of 30 and 39, and just 27% for those 65 and older.

Chris Elliott_Headshot“The days when targeting a baby boomer was a can’t miss strategy is over. Those under 40 are now driving the industry,” Chris Elliott, senior economist at Restaurants Canada, said in a statement. “Whether they are looking for environmentally sustainable alternatives, tech friendly options or more diverse menu offerings, it’s vital for restaurant operators to adapt to their changing customer base in order to appeal to new guests and maintain brand loyalty.”

 A taste for sustainability

Millennials are leading the increasing focus on sustainability in the foodservice industry. According to the report: “Their preference to do business with companies that prioritize environmental stewardship and social responsibility extends to their dining habits — and restaurants are responding to this demand.

Eight out of 10 foodservice business operators across Canada now say environmental sustainability is important to their success and 72% say they have made changes to their business operations to become more sustainable.

Nine out of 10 say they plan to continue or improve on their current level of environmentally sustainable operations over the next three years.

Currently:

  • 98% recycle.
  • 93% use energy or water-saving equipment.
  • 77% track, compost, or donate leftover food.

Shanna Munro_Headshot“Finding ways to operate more sustainably is simply part of doing business in restaurants today,” said Shanna Munro, president and CEO of Restaurants Canada. “Though changes often take some upfront investment, many are seeing the benefits not only for the planet, but for their bottom line.”

According to the 2019 Foodservice Facts report from Restaurants Canada, 70% of restaurant operators say they have made changes to their menu/selection of items. Growing appetites for plant-based dining have been a significant reason for this.

With Canadian consumers indicating shifts in protein consumption (vegan and vegetarian meat alternatives showing the highest growth), plant-based options appear here to stay as more diners make the switch to “do their part” for the environment.

Demand for convenience

With the rise in food delivery skyrocketing in 2018, consumers have no shortage of options when ordering in; everything from their favourite local restaurant to major franchise chains and even fine dining is on the table when it comes to delivery today.

The impact of the demand for delivery is mostly being felt in densely populated cities where foodservice is more economically viable. Foodservice orders made online, through websites and mobile apps, totaled more than $4.3 billion in 2018 (a 44% increase from 2017) and can be broken down into the following key categories:

  • Quick-service restaurant delivery sales increased by 49%.
  • Full-service restaurant delivery sales increased by 54%.

“As Generation Z and Millennials look for convenience, eating out or ordering in is appealing as a time-friendly alternative to cooking,” said Elliott. “We expect to see these generations looking to order food at lower price points, and while health is important, many want to indulge a little too.”

Beyond delivery tech, Millennials and Generation Z customers prefer establishments that offer free Wi-Fi. They also like to use social media platforms, such as Instagram and Snapchat, to interact with establishments, leave reviews, follow activity and tag photos. In order to attract this key customer base, restaurants (and c-stores) should adapt their digital marketing and advertising strategies to keep customers hungry for more.

Foodservice challenges

Despite industry growth, foodservice operators are struggling in some areas:

  • Labour costs, as well as recruiting and retaining employees, are the top two challenges currently facing foodservice operators.
  • Higher minimum wages, food costs and increasing labour shortages have resulted in higher operating costs, contributing to a 4.2% increase in menu prices at restaurants across the country.
  • A slowdown in average annual foodservice sales growth is expected, given rising household debt and slower job creation.
  • Commercial foodservice sales in Canada are predicted to decelerate to an average of 4% growth per year between 2020 and 2023.

Overall, Canada’s foodservice industry is forecast to surpass $100 billion in annual sales in 2021, presenting exciting opportunities.