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Consumer foodservice in Canada – how’s the eating scene changing?

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Consumer foodservice saw current value growth in line with the review period CAGR in 2015, while transaction volume growth also remained good.

by Euromonitor Intl.

Sales are benefiting from busy consumer lifestyles and a strong premiumisation trend, with consumers increasingly focused not only on flavour and indulgence but also by health and ethical factors. Growth is however being constrained by a high sales base and by rising economic concerns for many Canadian consumers.

Millennials’ demands encourage brand reinvention

As consumer foodservice players face strong competition and an increasingly discerning Canadian consumer base, there was a growing focus on catering to consumer demands among the leading players, even when this required a degree of reinvention. A&W notably rolled out a new store format aimed at appealing to millennials in 2015, with this having a “hip nostalgia” positioning. Second Cup also reinvented its store format and brand in an attempt to appeal to millennials. A focus on brand reinvention is meanwhile likely to continue in the forecast period, with McDonald’s set to offer customisation and table service from 2017.

Leading chains benefit from strength in franchising

Franchising is the key driver of sales and growth for consumer foodservice, with various franchisees accounting for the largest share of value sales in 2015. Prizm Brandz, which ranked second in NBO terms in 2015, is meanwhile also a franchisee and represents Yum! Brands’ chains in Canada. The leading players in GBO terms are meanwhile those who are most successful at offering appealing franchises, such as Restaurant Brands with Tim Hortons and McDonald’s with its iconic eponymous chain.

Independents struggle as competition intensifies

Growth in consumer foodservice in 2015 was almost entirely driven by chains, with independents seeing overall sales stagnate. Chained players benefit from stronger economies of scale, with this enabling them to cater to consumer demands for premiumisation without sharp price increases. The leading chains are thus shifting towards higher-quality, healthier and more ethical ingredients, while independents are struggling to compete. There are some areas where independents are outperforming chains, however, such as street stalls/kiosks and bars/pubs. Millennials in particular often prefer independent outlets in these channels, viewing these as offering greater individuality and authenticity.

Forecast period to see focus on premiumisation, ethics and convenience

Chains will continue to drive growth in consumer foodservice in the forecast period, supporting a slightly stronger value growth at constant 2015 prices in comparison to the review period. There is expected to be a strong focus on offering higher-quality and more ethical ingredients, with a number of leading players such as McDonald’s and MTY for example shifting to cage-free eggs. There is also expected to be a growing focus on convenience, with online ordering and app-based payment systems notably likely to feature increasingly prominently.