A Darwinian look at the fight for the food dollar

Children are taught that caring is sharing. It’s a noble idea that helps kids develop kindness and generosity. Even Barney, the famous purple dinosaur, has his own 50-minute video championing this approach. But can this wisdom apply to the highly competitive restaurant industry, where there is less room to ‘share’ the marketplace?

As more players enter the foodservice landscape, competition for the food dollar squeezes out the ideal of sharing. In these uncertain economic times, restaurants, like many other businesses, have to play a zero-sum game – where a gain by one person or side must be matched with a loss by another person or side. To quote a famous man, it essentially comes down to survival of the fittest. Barney certainly wouldn’t approve. Then again, dinosaurs are extinct for a reason.

On the surface, it looks like the restaurant industry is growing. Over the next four years, commercial foodservice sales are forecast to climb by an additional $10 billion to a record $65 billion. Including non-commercial foodservice, sales will expand to more than $80 billion.

This is an impressive figure, but looks can be deceiving. After adjusting for menu inflation and population growth, real per capita foodservice sales are forecast to increase by just $41 over the next four years – which means the average Canadian will only spend an additional $10 per year on food away from home. Although total commercial sales per person bump up to $1,596 annually, they still remain below 2008 levels. To expand, restaurateurs will have to take market share away from their competitors rather than hope to grow the pie.

Several factors intensify this competition. Over the next four years, Canadians will experience modest disposable income growth of 3.9 per cent per year – down from an average annual growth of 4.6 per cent over the previous 10 years – due to weaker wage inflation. Income growth softens, but debt levels remain well above sustainable levels. Canada’s economy will continue to expand, but at a slower pace than what we experienced in the previous decade.

Foodservice Pie Shows Growth

 By Chris Elliot, Restaurants Canada Senior Economist

August 8, 2014

Staying on top of your game

So how can operators be more competitive? An obvious place to start is controlling your input costs to protect profit margins. It’s no secret high food and labour costs can quickly erode profits. That’s why programs like Groupex work to help independent operators save money on food and beverage costs.

It’s also important to keep up with current and emerging trends, because knowledge is power.

Restaurants Canada’s research reports keep members in the loop. For example, our Operations Report helps you with your financial planning, whereas our 2014 Canadian Chef Survey gives you the scoop on the latest menu trends.

As always, product quality and variety is critical. As supermarkets that sell pre-cooked food enter the competitive landscape, restaurateurs are finding creative ways to mix up their menu items and stand out from the crowd.

Competition may make sharing difficult, but it pushes us to evolve, innovate and stay ahead of the curve. It motivates restaurateurs to give their customers the best food and service they can. This is how the strongest restaurants not only survive, but thrive.