COVID continues to hammer restaurant sector

Foodservice sales have rebounded since the start of the pandemic, but recovery is slow and could worsen this winter

Food sales are rebounding in the restaurant industry but are still a far cry from pre-COVID-19 levels, according to recent statistics.

Commercial foodservice sales in Canada were $4.1 billion in June, up from a pandemic low of $2.4 billion in April but still well below pre-COVID levels of $6.3 billion in February, according to Statistics Canada.

People are gradually returning to restaurants as government restrictions are eased, but June’s sales were still 38 percent below year-ago levels.

Restaurants Canada is forecasting $21.7 to $44.8 billion in lost sales in 2020 because of the pandemic.

“The range in the forecast reflects tremendous uncertainty as the industry heads into fall and winter,” said senior economist Chris Elliott.

“Restaurants are likely to see further erosion in sales in the coming months with patio season ending and possible consumer trepidation about indoor dining. A second wave of confirmed COVID-19 cases would potentially lead to sharply lower sales.”

A Restaurants Canada survey of its members revealed that 91 percent say July sales were also down compared to year-ago levels, but there was some improvement over June sales.

Sylvain Charlebois, director of the Agri-Food Analytics Lab at Dalhousie University, has seen the federal government statistics.

“They are problematic,” he said.

The Analytics Lab and Caddle recently surveyed 10,851 Canadians and came up with a similar conclusion as Restaurants Canada.

The survey found that 23.6 percent of Canadians intend to be working from home a year from now, which means less dining out.

The lab is forecasting that 30 percent of all meals will be consumed in restaurants by July 2021, compared to pre-COVID levels of 41 percent.

“While the future lies in uncertainties, this may represent a loss of up to $20 billion over the entire year for the hospitality industry,” stated the report.

Charlebois said Canada will likely lose about one-quarter of its restaurants over the next year. Chains are extending payment terms on their bank loans in an attempt to weather the storm.

“It’s really getting bad out there,” he said.

Elliott said 52 percent of Canada’s restaurants are operating at a loss, while another 20 percent are breaking even.

“That’s the biggest crisis right now,” he said.

“Restaurant operators are certainly going to be in for the fight of their lives over the next six months but at the end of this we’re going to be a much stronger industry.”

He thinks one cause for hope is that COVID is leading to greater demand for locally sourced ingredients, which should result in a tighter relationship between restaurants and area farmers.

The impact of the lost restaurant sales on the farm sector largely depends on the type of commodity being produced.

For somebody involved in the production of chicken wings, french fries or high-end cuts of beef, it’s pretty immediate.

“A lot of people were willing to pay a lot to get that nice, juicy steak in their favorite steakhouse,” said Charlebois.

“They were willing to pay triple the price of that same piece they would find in a grocery store.”

He noted that restaurants are hit hard by shifts in consumption patterns much more quickly than growers, but it eventually trickles down to the farmgate.

Wade Sobkowich, executive director of the Western Grain Elevator Association, said grain companies are not spending a lot of time fretting about the reduced restaurant traffic, at least not around the WGEA board table.

Canadian grain companies mostly sell to mills and processors in other countries, not directly to restaurants and grocery stores in Canada.

“It’s all very secondary and definitely not something we talk about around here,” he said.

“We just focus on the core aspects of our business. I would call that a peripheral type of demand impact to us.”

Charlebois wonders if the grain companies are guilty of operating under an outdated 1980s model of business.

“Nowadays it doesn’t matter where you are within the supply chain, you have to care about what goes on at retail because it will eventually catch up to you,” he said.

However, he acknowledged that the flagging restaurant demand has more direct impact on other parts of the food chain, such as potato growers, because 75 percent of french fries are sold in restaurants.

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