Canadian Foodservice Industry Shows Signs of Recovery in First Quarter, Reports NPD

After four quarters of weakness, Canadian restaurant traffic grew modestly in the first quarter of 2010, up 2.3 per cent versus the same period one year ago, according to The NPD Group, a leading market research company. At the same time, consumer spending inched up for the second consecutive quarter with a one per cent gain.  Performance for Canada is rebounding more quickly than in the U.S., where traffic declined for the seventh consecutive quarter – the most prolonged period of weakness since monitoring began in the late 1970s.

Results from NPD’s CREST®, a tracking service that monitors consumer purchases of commercially-prepared meals and snacks, show that all segments of the industry experienced traffic growth in the quarter with QSR (Quick-Service Restaurants) demonstrating a three per cent gain, casual dining and retail up two per cent and family/midscale up one per cent.  During the recession, deal offers have been one of the primary tools restaurant operators have leveraged to drive traffic, particularly in the QSR and family/midscale segments, where deal-related visits demonstrated increases of seven per cent and six per cent respectively in the first quarter.

“While deal-related visits have exhibited growth for eight consecutive quarters, it is important for foodservice operators to remain innovative with their use of promotional offers,” said Linda Strachan, Restaurant Industry Analyst, The NPD Group.  “Promotions/deals that have grown in importance this year include discounted prices, daily specials and discount coupons.  Value-priced menu items also remain popular and continue to be added to menus by many chain operators.”

A number of foods and beverages posted gains during the quarter, most notably breakfast items, coffee and alcohol.  Carbonated soft drinks returned to growth after posting declines in six out of the past seven quarters, and the popularity of sandwiches grew, mostly supported by innovation in wraps and chicken sandwiches.

Family visits also turned positive this quarter, reversing a negative trend for parties with children under 13 that had hit the QSR segment especially hard over the past 18 months.  Parties with children gravitate towards the QSR segment, with its concentration in drive-thru, delivery occasions and meals consumed at home or in the car. 

While restaurant traffic and consumer spending demonstrated modest increases, cheque averages experienced a slight decline during the quarter with the average amount paid per person for a meal or snack down 1.3 per cent compared to the same period one year ago.  Indeed consumers are visiting restaurants more often;however, they are managing their spending by choosing less expensive restaurants and menu items, and cutting back on some of the extras like appetizers and side dishes.

“Overall it was an encouraging quarter, with signs emerging that the Canadian restaurant industry is poised for recovery,” said Strachan.  “As the economy continues to strengthen and consumers return to more typical behaviour, operators will be looking for ways to move beyond discounting to deliver value that resonates with customers. Price aside, it is critical to understand which areas need more emphasis when marketing to consumers, whether that means emphasizing the food itself, the service, the atmosphere or a combination of all three.”