Canadian Vending

Features Consumer Behaviour Trends
Dispensing Strategies: Pocket … Change

Pocket . . . change


April 7, 2008
By Michelle Brisebois

Topics

After we’ve paid all of the “have to haves” in life, the leftovers get to be spent on those things we “want to have.”
Food is an interesting category because we have to have it to survive. It’s also true that how we have it determines whether it is a need or a want.

After we’ve paid all of the “have to haves” in life, the leftovers get to be spent on those things we “want to have.”

Food is an interesting category because we have to have it to survive. It’s also true that how we have it determines whether it is a need or a want.

When the economy slows, it’s usually bad for most businesses; however, we also know that some sectors actually benefit from a tight economy. Small indulgences often become a viable substitute for fancy dinners out and vacations.

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So will vending suffer or benefit from shifting consumer behavior? 

Everyone wrestles to capture “share of consumer stomach.” The Canadian Restaurant and Foodservices Association (CRFA) hints to a cooler but steady foodservice industry in 2008. In its December 2007 forecast, the association projected that although Canada’s foodservice industry will surpass $55 billion in 2008, total sales will grow only slightly above inflation at 3.3 per cent over 2007.

An energy driven economy in western Canada will see healthy gains but other regions will feel the effects of continued economic weakness. The CRFA is forecasting menu inflation of 2.7 per cent for 2008, resulting in real foodservice sales growth of 0.6 per cent.

Consumers with less discretionary income will shift their consumption slightly away from foodservice. The CRFA also forecasts that with weaker foodservice sales growth in 2008, the foodservice industry’s share of the total food dollar will slip slightly to 41.2 per cent from 41.4 per cent.

The total food dollar captures all spending on food in Canada, by consumers, tourists, government and business.
Less discretionary income has coincided by some aggressive discounting by grocery chains, which will likely attract consumers back to the grocery store and away from the restaurants for their next meal. Their forecast also suggests that contract and social caterers will continue to lead the way for a second straight year with a 6 per cent sales increase in 2008 over 2007.

There is a strong demand in remote foodservice at camps serving the natural resources sector, and increased spending at health-care facilities is cited as the driving force in this sector.

So if social caterers are reaping the rewards of this new economic trend – who’s facing tougher times?
Tourism continues to be a softer sector resulting in little change in foodservice sales growth at full- and limited-service restaurants. Full-service restaurants will grow 3.1 per cent in 2008 compared to a 3.2 per cent increase in 2007. Limited-service restaurants are projected to grow by 3.2 per cent in 2008, down from a 3.4 per cent increase in 2007.

This sector carries a lot of weight since full- and limited-service restaurants represent two-thirds of total foodservice sales in Canada.

The pubs, taverns and nightclubs segment is once again projected to see a decrease in sales – declining 2.2 per cent expected for 2008, compared to a 2.9 per cent decline in 2007. Sales at bars have dropped by 7.8 per cent between 2004 and 2007.

This decrease is largely attributed to a 15.8 per cent decline in units.

Accommodation foodservice (hotels/resorts) is forecasted to only grow by 3.5 per cent in 2008 compared to 5.3 per cent in 2007.

Self-operated institutional foodservice will expand 4.9 per cent due to increased spending at health-care facilities, transportation and universities (echo boomers are funnelling out of high schools and into post secondary in record numbers).

So how will vending fare in all of this?

The numbers suggest a positive outlook. Retail foodservice and “other foodservice” (which includes vending) will grow 4.9 per cent and 3.1 per cent respectively.

The foods typically sold in vending machines are positioned well for riding out the storm. In spite of our obsession with slimming down, Packaged Facts and Census Bureau Data reports that U.S. retail sales of candy will grow 4 per cent annually over the next five-year period. It also reports that convenience and portion-control are two prevalent trends in the food industry.

Since vending excels at single-serve and smaller portions, we stand to truly capitalize on one of fastest growing segments.

Here’s the dichotomy – a fearful consumer is not good for economic growth but for our industry a skittish consumer is probably a positive thing. If people tighten their financial belts just a bit, then they’ll simply trade to another level in the supply chain.

White tablecloth consumers begin to frequent upscale casual and casual dining loses share to quick serve, grocery and vending.

There’s evidence to suggest that skittish is exactly where Canadians are residing on the panic scale.  A joint survey by Harris-Decima and Investors Group conducted in February 2008, suggests that Canadian consumer confidence has reached its lowest point in over two years.  The overall index fell to 81, down five points from the last survey in September 2007.

It’s the lowest level since September 2005, when the index stood at 75.

Researchers do point out that although consumer confidence is down; Canadians aren’t pairing up the animals and building the ark just yet.

“What Canadians have learned over the past 10 years or so is that in every instance when they consumed a lot of news coverage that said the economic sky was falling, it turned out not to be the case,” confirmed Harris-Decima president Bruce Anderson.

Put machines in booming sectors such as post secondary, health care and growing industries such as the energy sector. Make portions smaller, offer healthy options and some upscale decadent treats.

If we play our cards right, this may be the most lucrative economic slowdown vending has ever seen.