Sluggish Canadian Economy Limiting Profit Margins in Foodservice Industry

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OTTAWA — Canada’s foodservice industry will face challenging times in the coming year, according to The Conference Board of Canada’s latest Industrial Outlook: Canada’s Food Services Industry–Winter 2016.

The report cites the impact of slowing disposable income growth and record household debt levels as the industry’s main challenge. “Canadians now carry the highest debt-to-income ratio among G7 countries,” says Michael Burt, director, Industrial Economic Trends. “Consumers that prioritize paying off debt could spell bad news for Canada’s foodservice industry, since one of the first items that households cut back in difficult economic times is dining out.”

Growth in consumer spending on dining out varies greatly by province. Alberta is experiencing a decline in per capita spending on foodservice while Quebec has experienced modest improvements in foodservice spending per capita. Ontario and B.C., however, continue to experience strong growth in foodservice spending, buoyed by strong consumer demand and robust housing sectors. Restaurant receipts in these two provinces have grown by an average of 5.3 and 6.9 per cent per year respectively since 2012, compared to an increase of only 3.2 per cent across all other provinces.

Canada’s foodservice industry is also expected to benefit from innovations, such as food-ordering apps, which allow operators to promote their menu choices and grow sales to customers who may not have otherwise visited their location.

Other report findings include:
• A weak Canadian dollar is encouraging international tourists to visit Canada and making Canadians rethink travel abroad. This should support rising foreign and domestic tourism spending at food service operations.
• As cost growth outstripped revenue growth in 2015, the industry’s pre-tax profits fell to $1.6 billion

 

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