The future looks bright
In 2022, the world began its return to normal. The pandemic was challenging foodservice operators, including convenience stores. In 2023, the pandemic seems all but behind us (at least in terms of restricting daily routines), but the foodservice landscape has shifted significantly. Several trends are impacting commercial food service operations; however, many of these trends do not severely impact convenience store foodservice.
The COVID-19 pandemic required unprecedented government spending. One of the consequences of this government spending is inflation. Food inflation has been significant, peaking at 11.4% in November 2022. Other factors contributing to food inflation include the war in the Ukraine, energy costs, fertilizer shortages and droughts. Fortunately, food inflation is decreasing, projected at 9.2% by the end of the first quarter of 2023 and is forecasted to normalize at about 2% in 2024.
The increased cost of food, unsurprisingly, has an impact on foodservice. Early in the inflationary period, foodservice operators were able to increase prices to reflect the increased food product costs. More recently, as consumers worry about disposable income in the face of inflation and fear of a recession, operators have been adjusting menus and recipes to substitute lower cost ingredients and reducing portion sizes.
Even as inflation rates decrease, the impact of the inflationary period is ongoing (i.e., the 9.2% inflation forecasted for 2023 is incremental to the significant inflation rates experienced in 2022). Foodservice operators will continue to refine recipes and menus to try and control costs. A renewed focus on controlling food costs through procurement, inventory and production controls will also continue throughout the year.
Labour, along with food, is the other major expense category for foodservice operations. Labour shortages, especially back-of-house positions, have long been an issue for foodservice operators. The labour challenges have spread to most industries. People are comfortable applying, and are being hired, for positions they would have not considered in 2019. The labour situation in Canada can best be described as an employee’s market at present. When labour shortages occur, service industries with entry-level and low wage positions are most adversely impacted.
Few, if any foodservice operations are fully staffed. Foodservice operations are offering pay rates and benefits previously unseen to attract and retain staff. As employment options increase, many employees are not willing to consistently work long hours, nights and weekends, etc. or for minimum wage rates.
While this is a significant challenge for commercial foodservice operators, convenience foodservice operators are less impacted. Sure, the same challenge exists to find employees; however, with the right menu items, limited incremental labour is required to provide foodservice in convenience stores. In previous columns, I have discussed the labour advantage realized by convenience store food services. As labour is one of the biggest expenses for most foodservice operators, convenience stores have less upward pressure on prices, which is a competitive advantage (e.g., more able to offer value menu deals than traditional foodservice operations).
Related to the labour challenges, technology is increasingly becoming an important part of foodservice delivery. While traditionally lagging with respect to technology, the foodservice industry has adopted technological advances to improve operations. Technology adoption in the industry was accelerating prior to the pandemic and increased significantly as customers became more comfortable using technology to place food orders. Technology is being used in ordering (mobile order pay, kiosks, online), delivery (robots and drones), production (robots) and for ordering/inventory to name a few.
Technological advances continue to be developed. However, given the foodservice labour cost advantage, c-store operators are not yet able to realize significant cost-saving benefits of investing in such innovations.
Sustainability is increasingly important in foodservice operations. Canada’s single-use plastics ban, for example, targets foodservice operators. However, foodservice sustainability can take many forms, including waste reduction initiatives, energy efficient equipment, sustainable procurement initiatives, hyper local food initiatives and increasing plant-based menu offerings.
For c-stores, waste reduction by using compostable or recyclable service ware should be considered. Such service ware is relatively expensive, so make sure that your municipality’s waste management can recycle or compost these products. Make sure you let your customers know about the sustainability initiatives you are practicing—tell the story.
A benefit of practicing sustainable foodservice is that many potential employees want to work for an organization that shares their values. Of course, for convenience stores, to realize such benefits, sustainable business practices would have to extend to the core retail operation.
In conclusion, the foodservice industry has changed significantly in recent years. Part of this is due to consumer demand: retail food service customers have adopted a “what I want, when I want it” attitude to which operators have had to respond. Another driver is the challenges operators face with respect to increasing food costs, labour costs and labour scarcity. At the core, providing good food and good service remains the key to success; however, how one accomplishes these feats is changing. Fortunately, for c-stores, the challenges aren’t as daunting as for their commercial foodservice competitors. The outlook for 2023 from a convenience foodservice perspective is bright.