research restaurants canada quarterly forecast · spending at restaurants at a relatively quick...

Restaurant Quarterly Forecast 1

Q1 2020

Restaurants Canada Quarterly Forecast

RESEARCH


Highlights

� Due to the unprecedented uncertainty surrounding COVID-19, this edition of the Quarterly Forecast offers three possible scenarios for commercial foodservice sales in Canada for 2020.

� In the first scenario, annual commercial foodservice sales are forecast to decline by 24.4% in 2020 compared to 2019. This scenario assumes that pent-up demand will boost consumer spending at restaurants at a relatively quick pace once containment measures are lifted. Strained household finances and a decline in international tourists will nevertheless keep foodservice sales below 2019 levels over the remainder of the year and into 2021.

� In the second scenario, annual foodservice sales are expected to decline by 37.2% in 2020. In this model, consumers are more apprehensive about returning to restaurants once containment measures are lifted. In addition, discretionary spending at restaurants will be restrained over the near term due to mounting household debt and weak consumer confidence.

� In the third scenario, containment measures are removed slowly and many Canadians are reluctant to go out to restaurants. Spending at restaurants remains fragile over the remainder of 2020 and into 2021 due to weak economic conditions and lingering effects from COVID-19. As a result, annual foodservice sales are expected to decline by 48.4% in 2020 compared to 2019.

� The latest forecast by TD Economics calls for Canada’s economy to contract by 7.5% in 2020, followed by a 7.3% rebound in 2021. Nevertheless, economic activity will remain below pre-COVID-19 levels until mid-2022.

� Canada’s unemployment rate is expected to jump to 12.6% in the second quarter of 2020 before returning back to pre-COVID-19 levels in the third quarter of 2021.


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With the COVID-19 pandemic unfolding at an unprecedented pace, there is an extraordinary amount of uncertainty about the effects the duration and severity of this crisis will have on Canada’s foodservice industry. Given these unpredictable times, this edition of the Quarterly Forecast foregoes the usual quarterly estimates of commercial foodservice sales by segment over a two-year period. Instead, we offer three possible scenarios of monthly commercial foodservice sales growth for Canada to help your business plan ahead for the remainder of 2020.

At the time of this report, several provinces were slowly loosening restrictions for dine-in service at restaurants. But it remains unclear how government restrictions and stimulus measures will impact the economic recovery, and how consumers and businesses will adapt over the remainder of 2020 and into 2021. All of these unknowns make it impossible to forecast sales by the various segments that make up the commercial foodservice industry.

As of the end of April, Statistics Canada has only released commercial foodservice sales data for the first two months of 2020, which excludes the massive impact that COVID-19 has had on the industry. In January 2020, foodservice sales in Canada rose by 3.6%, a pace on par with the gains made in 2019. An extra day in February boosted foodservice sales by 6.8% compared to February 2019.

Since data for March and April have not been released by Statistics Canada, Restaurants Canada has relied on biweekly member surveys to quantify the impact of COVID-19 on foodservice sales. Based on these surveys, foodservice sales are expected to have contracted by 49% in March, as social distancing measures were put in place across the country during the second half of the month.

Recent data from Restaurants Canada’s surveys indicate that commercial foodservice sales in April 2020 may have declined anywhere from 60% to 75% compared to April 2019. In the first half of April, more than half of single-unit operators temporarily closed down due to COVID-19 while another 8% closed permanently. The remainder were open for takeout and/or delivery only. In contrast, seven in 10 chain locations were open for takeout and/or delivery, while the remainder were temporarily closed.

As containment measures are eased in parts of the country throughout May and June, foodservice sales are expected to improve relative to April. In May, sales are forecast to decline between 41% and 73% on a year-over-year basis. For June, sales are projected to fall between 35% and 68%.

Overall, sales will steadily improve over the remainder of 2020 but will remain well below where they would have been based on our pre-COVID-19 forecasts for 2020.


Three potential paths for foodservice sales in 2020

Economic activity in Canada won’t return to pre-COVID-19 levels until 2022

With so much uncertainty, Restaurants Canada has produced three forecasts for foodservice sales. Regardless of scenario, commercial foodservice sales will not return back to their pre-COVID-19 levels in 2020.

Scenario 1 – In this scenario, pent-up consumer demand will lift foodservice sales in May and June relative to April. This forecast will be heavily contingent on how quickly containment measures are lifted by provincial governments and how swiftly consumers and business adapt. The combination of strained household finances and few international tourists will keep foodservice sales below 2019 levels over the remainder of the year and into 2021. As a result, annual foodservice sales in Scenario 1 are expected to decline by 24.4% in 2020 compared to 2019. This would represent a loss of $21.2 billion in commercial foodservice sales.

Scenario 2 – This is the most likely scenario, in which consumers are more cautious about returning to restaurants and drinking places once containment measures are lifted. A high unemployment rate, staggering household debt and weak consumer confidence will restrain overall consumer spending

At the end of 2019, TD Economic was forecasting real GDP growth of 1.6% in 2020, and an unemployment rate that would climb slightly to 5.9% compared to 5.7% in 2019. Much has changed since then.

With Canada’s economy in a deep recession, TD Economics lowered their annual real GDP outlook to a 7.5% contraction in 2020. The largest decline will be felt in the second quarter of 2020 when Canada’s economy is forecast to contract by an annualized 42%. It will be followed by an economic rebound of 7.3% in 2021. That rebound, however, will not be enough to offset the decline in 2020. As a result, Canada’s economy won’t return to pre-COVID-19 levels until sometime in 2022.

for the remainder of the year. As a result, annual foodservice sales in this scenario are expected to decline by 37.2% in 2020 compared to 2019. This would represent a loss of $30.7 billion in commercial foodservice sales.

Scenario 3 – In the third version, containment measures are removed more slowly compared to the previous two scenarios. Once lifted, consumers are reluctant to dine out at foodservice establishments at first. And when consumers finally return to restaurants, they will eat out at a much slower pace. As a result, annual foodservice sales are expected to decline by 48.4% in 2020 compared to 2019. This would represent a loss of $39 billion in commercial foodservice sales.

It should be noted that a second-wave of COVID-19 cases would nullify any of these forecasts and would result in a sharp downward revision in our initial foodservice sales estimates for 2020.

Depending on how events unfold, the next quarterly report will provide a more detailed sales forecast by segment through to 2021.

Likewise, Canada’s job market will see a sharp increase in the unemployment rate, averaging 12.6% in the second quarter of 2020 before returning back to pre-COVID-19 levels in the third quarter of 2021.

The depth and duration of the recession will be contingent on how long current containment measures stay in place, if more stringent isolation and social distancing measures are required and the effectiveness of current fiscal and monetary stimulus measures. As new economic data becomes available, Restaurants Canada will adjust the foodservice sales forecasts accordingly.


2020 Commercial Foodservice Sales Forecast - Canada

(in billions)

Commercial Foodservice Sales - Canada

2020 over 2019


$77.4

$56.3

$46.7

$38.4

$0

$10

$20

$30

$40

$50

$60

$70

$80

$90

pre-COVID-19 forecastfor 2020

Scenario 1 Scenario 2 Scenario 3

Lowestannual

commercial foodservice sales since

2014

Lowestannual


2008

Lowestannual


2003

-24.4%

-37.2%

-48.4%

-60%

-50%

-40%

-30%

-20%

-10%

0%Scenario 1 Scenario 2 Scenario 3

Source: Restaurants Canada


Monthly Commercial Foodservice Sales - Canada

(seasonally adjusted,

in billions)

Monthly Commercial Foodservice Sales - Canada

(seasonally adjusted,

in billions)

$0

$1

$2

$3

$4

$5

$6

$7

pre-COVID-19 forecast for 2020 Scenario 1 Scenario 2 Scenario 3

Source: Restaurants Canada and Statistics Canada

Nov-19

Dec-19

Jan-2

0

Feb-20

Mar-2

0-f

Apr-20-

f

May-2

0-f

Jun-2

0-f

Jul-2

0-f

Aug-20-

f

Sep-20-

f

Oct-20

-f

Nov-20

-f

Dec-20

-f

-80%

-70%

-60%

-50%

-40%

-30%

-20%

-10%

0%

10%

Actual Scenario 1 Scenario 2 Scenario 3

Source: Restaurants Canada and Statistics Canada

Jan-2

0

Feb-20

Mar-2

0-f

Apr-20-

f

May-2

0-f

Jun-2

0-f

Jul-2

0-f

Aug-20-

f

Sep-20-

f

Oct-20

-f

Nov-20

-f

Dec-20

-f


Economic Forecast - Canada

Real GDP - Canada

(quarter-over-quarter annualized growth)

1.6%

5.7%

-7.5%

9.4%

7.3%

6.0%

-10%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

Real GDP Unemployment Rate

2019 2020-f 2021-f

Source: TD Economics

1.0%3.4%

1.1% 0.3%

-9.7%

-42.0%

32.6%

15.8%12.8%

4.8%2.1% 1.8%

-50%

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

Q1-19 Q2-19 Q3-19 Q4-19 Q1-20-f Q2-20-f Q3-20-f Q4-20-f Q1-21-f Q2-21-f Q3-21-f Q4-21-f

Source: TD Economics


About the Restaurants Canada Quarterly Forecast

Restaurants Canada uses an econometric model to forecast commercial foodservice sales by using the Conference Board of Canada’s forecasts of consumer spending, disposable income, real GDP, employment and tourism by segment.

About Restaurants Canada

Restaurants Canada (previously CRFA) is a growing community of 30,000 foodservice businesses, including restaurants, bars, caterers, institutions and suppliers. We connect our members from coast to coast, through services, research and advocacy for a strong and vibrant restaurant community. Canada’s restaurant industry is an $93 billion industry, directly employs 1.2 million Canadians, is the number one source of first jobs, and serves 22 million customers every day.


For further informationRestaurants Canada

1155 Queen Street West, Toronto, Ontario M6J 1J4

Tel: (416) 923-8416 or 1-800-387-5649

Fax: (416) 923-1450

E-mail: [email protected]

Website: restaurantscanada.org

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