By Vince Sgabellone
It’s a busy time right now. Not only for the Canadian foodservice market, but rather for my Circana colleagues and me. While overall foodservice traffic growth has remained positive, it has been creeping uncomfortably close to zero for several months. Our latest CREST industry tracking data for the year ending August 2024 shows traffic growth slowed to two per cent, which is aligned with our forecast models for the next several quarters.
This slowdown has increased the volume of questions from our clients. How do I win back customers? Who’s winning and why? Where can I find growth? While every client situation is unique, a few common themes rise to the top. Let’s tackle these three questions one by one to look for solutions.
How do I win back customers?
Over three-quarters of consumers tell us they plan to reduce spending in the coming months. Economic indicators are generally improving, but consumers continue to face affordability issues brought on by high inflation and interest rates. As a result, the share of Canadians who tell us they can’t afford to eat at restaurants is approaching 20 per cent, up from a steady 14 per cent in recent years.
This is a good time to evaluate your value proposition and deliver deals that speak to your clients’ needs. Are you catering to the workday routine crowd, the frenzied family cohort, or young social mavens? Each has their own perceptions of value, so consider a combination of price promos, coupons, and the most popular, bundle and combo deals, representing 27 per cent of all deals. Value menus and discounts are the fastest-rising deal type. But if this is your dealing strategy, then be sure you have an exit plan. This economic pullback won’t last forever, and you’ll need to resume your full-price model at some point soon.
Who is winning and why?
For an answer to this question, check out my recent column on fast-casual restaurant concepts in the F&H October 2024 issue. These mostly small-chain operators have found the secret sauce of attracting guests and growing their base by blending unique food options with a pricing-service-ambiance model that lies somewhere between traditional QSR and FSR. Rapid unit expansion has also helped create awareness and stimulate trial among the restaurant-going consumers looking for an experience in exchange for their foodservice spending dollars, despite the austerity outlined above. A beverage-alcohol program certainly doesn’t hurt here either.
Where can I find growth?
There are plenty of small-growth pockets in the market, beginning with small occasions. Morning meal, snacking and beverage-only occasions are all on the rise. Consumers are looking to treat themselves to a foodservice occasion, even if they must scale back with lower-cost visits. Ensure your morning, late-night, and beverage programs are all current and capitalizing on the latest flavour and packaging innovations. Next, don’t forget about digital ordering, representing about 13 per cent of all foodservice visits. About half of all digital orders include a deal and a loyalty-program engagement, so don’t miss out on this chance to engage with your customers in this individualized way. Meanwhile, digital-enabled delivery is on the rise once again as consumers look to avoid on-premises costs.
One final thought as you consider your strategies during these challenging economic times — remember the older generations, aged 45 and up. Marketers tend to focus on younger cohorts to build their future customer base. Planning for the future is good, but maintaining profitability in the present is even better. Older consumers are more sheltered from the current economic challenges, they have more time and disposable income, and represent an outsized share of foodservice spending. Reaching these consumers with the strategies outlined here can be a recipe for success to keep you as busy as me and my Circana colleagues.
Vince Sgabellone is the director of Client Development and Foodservice Industry analyst at Circana. He can be reached at [email protected]
