Canada’s restaurant sector rebounded last year with increased profits, revenues and workforce, says the Conference Board of Canada.
It also says Canadian consumers should become accustomed to paying more for their food, in restaurants and in stores, as farmgate prices increase.
“Consumers have grown used to cheap food as their prices have fallen relative to other products for decades,” associate director Michael Burt wrote in a March commentary.
“No longer. Many of the factors driving prices are permanent and this means that consumers should expect their grocery bill to gobble up an increasing share of their budgets.”
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He blamed the new reality on higher fuel prices, growing demand for grain from the biofuel industry and increased world consumption of meat, which puts pressure on feed grain supplies.
Burt said food prices may fall slightly next year as farmers increase production in response to higher market prices. However, the long-term prospect is still for higher prices.
“Much of the price increase is being driven by structural factors that will not dissipate for the foreseeable future,” he wrote.
“In short, consumers should get used to paying more for their food.”
Canadian restaurants and the food service industry should also get used to higher profits.
The business-oriented think-tank said in a report last week that food service costs, mainly wage increases and higher food prices, are projected to rise 26 percent during the next five years. The sector’s pre-tax profit is also projected to increase almost 43 percent.
Conference board analyst Maxim Armstrong reported that many of the setbacks suffered by the food services sector during the recent recession have been recouped. While pre-tax profits fell 18 percent in 2009, they rebounded 13.5 percent in 2010.
“The recession temporarily forced Canadians to reduce their overall food budgets and consumers substituted by either going to a limited-service restaurant, which is generally cheaper, or by eating at home,” he wrote.
“Now that the economy is recovering, consumers are expected to progressively return to their old habits, which means spending a rising share of their food dollars at restaurants.”
The conference board report said eating at restaurants is one of the first non-essential items to be cut in tough times, but eating outside the home is one of the first luxuries to be picked up as times get better.
Pre-tax profits fell 18 percent to $1.1 billion in 2009, returning the industry to pre-2008 levels, said the report. There was a boost last year, but the board said the food services industry still faces problems.
“Profits declined steeply in 2009 and rebounded in 2010, but will need another year to recover completely from the recession,” said the report.
“Food services providers saw their already small profit margins shrink during the worst of the recession and those margins will recover only gradually.
