AmerCareRoyal - Market Update Q3 2023

Restaurant Industry Update

Q3 2023 Market Update

SUMMARY: North American economies continue to defy predictions of looming recession with strong job creation and steadily downward inflation trending. Labor and expense challenges are Operators’ primary concerns.

General Economic Outlook at Mid Year

209,000 jobs were created in the US in June, leaving unemployment flat at 3.6%, while Canada’s addition of 60,000 drive a slight uptick to 5.4% from 5.2% in May. The good news on jobs coupled with decreasing inflation – down in June to 3.4% in Canada and 4.05% in the US, lowest since early 2021 – is quieting fears of a North American recession, a positive note for the restaurant industry impacted heavily by consumer confidence and available disposable income. ( US Bureau of Labor, Ycharts)

Mixed Signals

Consumer demand is stable, and consumers have continued to spend while retailers and wholesalers have reduced inventories accumulated during the pandemic and supply chain crisis era. US and Canadian consumer confidence swung back upward through Q1, though still far lower than before inflation sparked in 2022. New data from Revenue Management Solutions, for instance, finds that quick-service traffic decreased 1.8% versus Q2 last year, while quantity per transaction fell by 3.5%, indicating that consumers are ordering fewer items to spend less. Rate of menu price inflation declined in June to 7.7% versus June of 2022 compared with May’s 8.8% rate over year. ( Hackett Assoc, SEKO Logistics, Conference Board of Canada, US Bureau of Labor Statistics, Revenue Management Solutions, Nations Restaurant News)

Operational Costs and Staffing are Restaurant’s Chief Concerns

98% of 1000 Restaurant Operators surveyed in May reported seeing increases in their expenses within the past three months. In response, 64% have switched to lower-priced brands, nearly two-thirds opting for distributor-exclusive brands instead of national brands. ( Technomic)

Staffing challenges persist for restaurant operators, the second highest priority challenge behind increased cost of food. At least partially in-response, the 2023 National Restaurant Association in May featured a striking number of robotics and automation exhibits with solutions for both back and front-of-house routines, possibly fore-shadowing implications for manufacturers and distributors of meal preparation and packaging supplies.


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