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By the numbers: A look at what’s happening in Canada’s foodservice market
By Barbara Smyth
July 12, 2013

 

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We live in a world of numbers. Whether you’re a statistician, a banker, a sports fanatic or a restaurateur, information and data are key parts of our daily lives. People often find numbers intimidating, but they shouldn’t.

At The NPD Group, we source and use consumer data to identify trends in the Canadian foodservice industry and help our clients better understand the marketplace to meet consumer demand. In this article, we’ll share some of this data so that you might also gain a fuller perspective on what’s happening in the Canadian marketplace.

Providing perspective

In order to identify opportunities, it helps to understand the overall industry landscape. For example, are Canadians eating out more or less often? If they are, where are they eating out, and when during the day are they eating out more, or less, often? Ultimately, perspective is required in order to make informed decisions. A general wouldn’t send his or her army into a war zone without having a strategic action plan, nor should you as a business owner make decisions without having a business plan grounded in facts to help guide you through the competitive foodservice environment.

The good news for the industry is that consumers are using foodservice more than ever. When compared to 2007, annual visits have increased by over 300 million. As Canadians’ lives become more hectic, and the need for help at mealtime grows, foodservice has become more crucial. 
Canadian foodservice travvid by segment - 2007 vs 2012

 
Despite a recent uptick, traffic in the full service segment (FSR) has fallen below the pre-recession 2007 period. In fact, there were 63 million fewer visits to FSR in 2012 versus 2007. By comparison, quick service restaurants (QSR), have gained over 350 million visits over the same time period.  

Much of this growth has been driven by the top QSR operators. For instance, in 2012 the top QSR operator in Canada drew an impressive 214 million more visits than the entire full service segment combined. Back in 2007, the same operator accounted for 150 million fewer visits compared to FSR.  

The diversified meal clock

Growth outside of lunch and supper has been key for QSR, which has been able to realize long-term growth by focusing on the breakfast and afternoon snack occasions. Both occasions have seen at least a 20 per cent increase in traffic since 2007 based on a combination of an overall change in eating behaviours during the recession and slow recovery years, as well as a focus on promotion and menu innovation in these dayparts. Menu offerings that are well suited to these dayparts include coffee, brewed and specialty iced beverages, smoothies, wraps, smaller-sized sandwiches and breakfast sandwiches that can be eaten on the go. Breakfast and snacking consumers in particular are driven by convenience due to a more ‘time-crunched’ lifestyle.

The full service segment has not been able to capitalize on the growth in these dayparts. As QSR has experienced growth of more than 20 per cent in these dayparts, FSR has seen a four per cent decline in traffic at breakfast and a 10 per cent decline during the afternoon snack occasion. So while there’s been overall growth at foodservice, FSR has struggled. As QSR poses more of a competitive challenge to FSR, it’s important for sit down restaurants to execute on what consumers expect from them, and make adjustments to reflect evolving demands.

When we survey full service dining visitors and ask them the reasons why they choose FSR over QSR, consumers tell us that they are looking at food quality, a relaxed  atmosphere and full service. What stands out is that it’s crucial to deliver on these expectations in order to elevate and differentiate from QSR.

Top QSR operators have invested a great deal of research and dollars behind not just enhancing their menu offerings, but also in renovating their locations so that their destination is appealing to consumers. It’s important to consider if your FSR venue is also keeping up with consumer expectations against these criteria.
Top 3 factors driving FSR vs. QSR channel selection
When it comes to the growing the afternoon snack occasion, consider the bar area. The second most popular reason for visiting a full service restaurant bar is to “socialize after work,” exceeded only by “hanging out with friends.” Overall, 89 per cent of bar visitors also indicated that they had some food when visiting the bar. It’s therefore important to meet consumer demand and drive bill size by including snackable and shareable items on the menu to capitalize on this opportunity. This is also a prime occasion to showcase new menu innovation and infuse variety into your offerings.

Who’s driving growth at foodservice?

Who eats out the most at foodservice? The answer is young adults. Eighteen-to-24-year-olds use foodservice an average of 238 times per year. Seniors, by contrast, use foodservice 157 times per year, the lowest of all the age cohorts. But don’t count this age group out. The average consumer aged 65-plus visited foodservice 24 more times annually on 2012 than in 2007. That’s the largest increase of any age group. This shift makes sense since people are retiring later, so eating out is a convenience that they need while still working, as well as value.

QSR accounts for much of the growth among seniors. The average number of visits per person in this age group is up by 19, while FSR has remained flat at plus one. Only the young adult segment (aged 18-24) shows slightly more growth with an increase of 20 visits over the same timeframe.

Looking ahead

Based on forecast modeling NPD has conducted, we anticipate that QSR will continue to outpace FSR growth through 2016 with total commercial foodservice visits exceeding seven billion, up from 6.7 billion in the latest year. What do we see as trends that will be of consequence in the near term?  

An aging population will mean opportunities for foodservice, and may lead to an added focus on health and wellness. Continued opportunity exists for growth in the morning with foodservice satisfying less than 10 per cent of breakfast opportunities. Snacking will also continue to become more important at foodservice as it transitions from an optional occasion to one that contributes to health and plays an important role in the Canadian diet.

Mapping a plan for success

Long-term trends point to challenges for the full service dining segment in Canada, which means that it’s all the more important to make smart decisions on how to attract customers and drive repeat business. Here are some suggestions for what restaurants should do in this challenging market:

  • Providing limited-time offers can create excitement without having to reinvent an entire menu. This allows your business to take advantage of the latest trends that all age groups are looking for, and add variety in a cost effective manner.
  • Consider promotions and menu options that capitalize on the growing snacking dayparts. Dinner and lunch remain central for the FSR segment, but growing business in-between meals is a smart way to drive additional revenue.
  • Look for ways to communicate with your consumers both in and out of your establishment. Today’s consumers have more access to information than ever before and have more opportunities to voice their opinions through social media. It’s important to have a strategy for meaningful dialogue with your consumers, and be transparent in what you’re serving them.

As we have seen, Canadians are eating out more than ever, and QSR has been the driver of this growth since 2007. Though the reasons consumers visit FSR differ from QSR, there are similarities that FSR can leverage. The first step is to have the facts for sound decisions. As the previously mentioned general would not go into battle without a strategic action plan, nor should you when vying for your fair share in the competitive Canadian marketplace.

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About the author

Barbara Smyth is Director, Foodservice Canada for The NPD Group. The NPD Group has more than 25 years of experience providing reliable and comprehensive consumer-based market information to leaders in the foodservice industry. For more information, visit www.npd.com or contact her at barbara.smyth@npd.com.

 
 
 
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