Understanding the true impact of the pandemic on the food industry at large, however, has taken a while longer. Restaurants Canada (RC) only recently published the 2022 update of its Foodservice Facts report, which highlights shifts in consumer behaviour and details progress in the ongoing recovery.
- The bad: After significant contraction in 2020 and 2021, nominal foodservice sales are projected to return to pre-pandemic levels in 2022; however, adjusted for inflation, real sales in 2022 will be 11.0% below 2019 results.
- The less bad: Retail foodservice, which includes c-stores, department stores, and other retail establishments, recovered nominally by 2021, reflecting shifting consumer behaviour, combined with sector resilience.
- The new normal: Remote and hybrid work continue to have an impact on consumer behaviour. Reduced commuting has translated into fewer away-from-home (AFH) meal occasions, however “Canadians’ love of coffee has resulted in a slightly quicker recovery in morning traffic.”
If history repeats itself
Beyond the psychological shock of the World Trade Centre attacks on 9/11, the event sparked an unprecedented short-term curtailment of travel, which signalled the beginning of a significant global recession and a world forever changed.
One unexpected phenomenon was that, in Q4-01, the immediate aftermath, limited-serve restaurants (LSR) grew faster than full-serve restaurants (FSR). In fact, some of the big QSR chains reported improvement in their performance year over year. I recall that the head of a major foodservice supplier organization looked at this trend that I had flagged at the time and was nonplussed: “Makes sense. I’ve seen this before. Consumers will trade down, before they step away from foodservice entirely.”
RC suggests, in Foodservice Facts 2022, that a similar phenomenon may occur in 2023 as a response to the forces of inflation/recession. Rising menu prices, putting pressure on cash-starved consumers, will possibly impact spending through selective AFH meal skipping, downsizing of meals and consumers searching for a deal.
Never waste a crisis
Winston Churchill famously said, “Never let a good crisis go to waste.” The great foodservice recovery represents an unprecedented opportunity for c-stores to add customers and increase penetration of the AFH foodservice market. And coffee is the key.
Canadians love coffee. Hot coffee is by far the number one beverage purchased AFH. Add in chilled/frozen coffee and nearly two-thirds of consumers are in play. While the foodservice industry lost about 700 million servings of coffee during the first 12 months of the pandemic, reports The NPD Group, the category rebounded as consumers returned to worksites, schools, and other outside activities.
In the 12 months ending July 2022, more than 2 billion coffee servings were ordered AHF, up 13% from a year ago. However, even with the double-digit increase, restaurant coffee servings are down 15% from three years ago, before the pandemic. Hot specialty coffee, like lattes, had the most substantial growth, up 16%, traditional or regular coffee servings increased by 14%, and servings of iced, frozen, or slushy coffee rose by 7% from a year ago.
“As more consumers return to their pre-pandemic routines, foodservice coffee will somewhat recover from the steep declines experienced during the lockdowns,” says Vince Sgabellone, NPD foodservice industry analyst. “Restaurants do face competition from at-home coffee appliances and the coffee-making expertise consumers learned while in lockdown, but their competitive edge is offering the convenience of a great cup of coffee when we’re on the go.”
For a channel defined by the word convenience, here lies the opportunity. Capturing drive-through coffee consumption as workers resume their commute, and/or offering a convenient source of caffeine (in-store or delivery) for them when they’re working from home, could be a significant pick-me-up for your c-store business.
Research provider Intouch Insight recently published results of a study of convenience store consumers across the U.S., which concluded that c-stores are well positioned to compete with both limited-serve restaurants and coffee shops.
In 2022, 88% of coffee drinkers surveyed reported having purchased coffee from a convenience store and those who purchased, 96% said they would again.