Foodservice Update Q3 2022: Revisiting Growth Perspectives

The writing is on the wall: economic growth is in jeopardy due to macroeconomic challenges around the world. From severely high natural gas prices in Europe, which affect everything from fertilizer prices to milk powders, to a housing crisis, and continued partial lockdowns in China. Coupled with rising interest rates, softening equity markets, and negative real wage growth, consumer confidence surveys unsurprisingly outline a worsening outlook for demand. It is likely that the US and Europe will both be entering a recession over the next 12 months.

Report summary

In Europe and the US, annual growth in 2022 is essentially guaranteed on the back of high inflation (which boosts total sales value) and last year’s relatively choppy comparables. There are, however, headwinds on the horizon for restaurants, as if the last 28 months weren’t enough. As affordability becomes an issue for consumers facing a rapidly rising cost of living, they are cutting back on expenses. This means that they are likely to eat at home or trade down to more value foodservices when dining out.

We need to look further ahead than the next few quarters before the market reverts to more ‘normal’ growth patterns. Economic growth through changes in disposable income will remain a key driver. However, demographics may be less supportive than in the past, as population growth slows down, at best, and the prime age groups for foodservices are expected to shrink over the next ten years.

In addition to traffic headwinds, cost pressures are increasingly straining the bottom line for many restaurants. The number of businesses in distress may increase.

What is next? Foodservices will not disappear. As in other occasions, the supply side will adjust. We expect more consolidation as expansion plans are being reviewed, downsizing is considered, and weaker players leave the market or are acquired by stronger players. Formats and concepts will keep evolving, as usual.

  • Tom Bailey

    Senior Analyst – Consumer Foods
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  • Maria Castroviejo

    Senior Analyst - Consumer Foods
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  • Michelle Huang

    Analyst – Consumer Foods
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