It’s no secret that demand for restaurant prepared meals and snacks in Canada over the last six years has been sluggish. It has even been referred to as the “new normal” marketplace – representing a departure from prior years when commercial foodservice consistently captured a growing share of consumers’ meal and snack spending.

While the current pattern corresponds to the generally prolonged weak economy, there have been some recent indications that the economic situation may finally be headed for improvement.

The NPD Group forecasts that over the next seven years (through 2020), total market growth will remain modest — growing less than one per cent a year over the next seven years. Quick-service traffic has slowed and it is believed that the segment will continue to be challenged based on a forecast rate of 0.9 per cent per year.

Family/midscale concepts’ traffic will perform slightly better than in the past while casual dining will outperform all other segments and is expected to recover losses from 2006. Research also indicates that although total sales will grow over the next five years, they will decelerate from an annual pace of 4.9 per cent in 2014 to 3.5 per cent in 2018.

Given this outlook, it will be a challenging environment for business growth for both operators and manufacturers. In this marketplace, foodservice marketers will need to modify their tactics and business strategies to succeed.

Canada’s restaurant industry has been held back recently by a slip in visit frequency. That component of the NPD forecast to 2020 remains a negative influence on potential growth, although more moderately than the hindrance seen over the past six years. The industry will begin to be held back a bit also by the somewhat lighter use of some restaurant categories by consumers as they age. However, it should be noted that forecasts such as these are something to take seriously, but are not cast in stone.

Younger generations will drive change

Millennials (those born between the early 1980s and the early 2000s) will be a large source of growth in the coming years. In 2013, Millennials alone made up nearly half of the Canadian population. By 2020, they will be 19 million strong and one of the largest demographic groups. This is a pivotal time to gain their favour as many of their habits are being formed now. They’re still at a life stage when their behaviours are flexible.

Further, the growing diversity of the population in Canada will drive shifts in menu offerings. The growing Asian population carries its influence on menus, as well, with noodles, rice, specialty sauces, and other foods and flavours. These menu changes will not only attract new customers, they will assist in holding the interest of existing customers. The importance of building loyalty Considering the forecasts indicate that restaurant industry traffic has been held back by a slip in frequency in restaurant visits, building loyalty among existing customers is more important than ever. Restaurant loyalty is a rather complex concept when considering the mix of various types of restaurants consumers visit to satisfy their needs. Foodservice operators know they share their customers with other direct and indirect competitors. Yet in this slow growth marketplace, the need for an operator’s own growth continues to be one of gaining a greater share of their customers’ overall visits – to build repeat visits. Although convenient location is one of the primary reasons for repeat visits, we find that good food is also key to repeat visiting. Repeat visits are also rather heavily related to perceptions of reasonable pricing and friendly, efficient service. These features combine to provide the experience that brings customers back for additional visits. It is important that operators and manufacturers work together to provide the experience consumers want. Finding new ways to encourage repeat visits Years ago, paper coupons were the incentive used most often by operators to attract customers. Coupons then gave way to tiered pricing strategies, combo meal offers, sweepstakes, and value menu items. Today, coupons are again a popular incentive, in part due to their growing online availability. The popularity of combo meal deals gave way to value menus and straight discounted price offers. More recently, loyalty rewards have been used more often by many operators. Going forward, rotating offers and creating new ways to entice consumers to visit must be a part of any operator’s marketing plan to encourage repeat visits. Mobile technology will be key Building stronger relationships among your customers has taken on new meaning with the growing importance of mobile technology. The need today is to communicate with customers at any time, wherever they are. In most cases, this means reaching out to them via their mobile devices. These are becoming even more important tools for consumers, and the expectation is that most of their needs can be met through these devices. Consumers’ use of mobile devices for ordering and paying for meals and reporting on the meal experience will continue to grow as mobile technology becomes even more integrated into everyday life. Growing interest in healthy menu items Consumers’ interest in healthy meal options is tied to the health needs of Baby Boomers and older individuals, the growth in ethnic groups accustomed to fresh food preparation, and greater awareness of the need for and benefits of healthy eating among younger generations. One place we’re seeing this is in the growing number of consumers who tell us they prefer gluten-free foods, not because of required dietary restrictions, but because of the perceived benefits of overall healthier eating. They expect operators to emphasize fresh ingredients and freshly-prepared foods. Fast casual restaurants continue to gain attention Fast casual concepts will continue to do well and will likely expand rapidly in Canada. Fast casual concepts have shown that consumers respond to newness and a fresh look. Expect to see more restaurant operators start to upgrade their concepts. Done well, the upgraded features and facilities could stimulate customer attraction, especially if accompanied with menu enticements and could help thwart this increased competitive threat. It’s both a mind-set and the reality of many Canadians of not being as well off as they were five years ago. Over this time period, Canadians have learned to do with less in many aspects of their lives. New habits are being formed. With this current mindset and challenging market environment, it is imperative that restaurant operators and their supplier partners pay close attention to what consumers are looking for in their dining experience. It is those who are best able to meet these wants and needs that will “win the battle for market share” and succeed in growing their business. See also: About the author Mark Dempsey is Director, Foodservice Canada for The NPD Group. The NPD Group has more than 25 years of experience providing reliable and comprehensive consumer-based market information and insights to leaders in the foodservice industry. For more information, visit www.npd.com or contact Mark at [email protected]

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