Apples and oranges: why we just can’t move restaurant demand into grocery stores overnight

It’s safe to say there is a tonne of focus on what is going on in the grocery market right now — from toilet paper, to flour, to ribeyes. As restaurants have closed or shut down due to COVID-19, there has been a huge shift to food purchases at the grocery store.

Kevin Grier, with Kevin Grier Market Analysis and Consulting, says that according to Statistics Canada, typically Canadians spend about 60 per cent of their food dollars in the grocery store, and 40 per cent of it eating elsewhere.

There are many questions from producers in terms of knowing restaurant demand is down — why can’t we just move the cuts that would usually go to the restaurants into the grocery stores?

Grier says this answer isn’t as simple as many would think. The fast-food industry makes up about 44 per cent of food service dollar sales. Another 44 per cent comes from the full-service industry, such as your favourite restaurants, then you add in another 4 per cent for caterers, food trucks, and bars. All of these are basically on a stand-still right now, with the exception of takeout, which is also down 10 per cent.

“When it’s all said and done, by my calculations, food service is probably down about one-third of their total volume. So the question is, why don’t the grocery stores go up by a third? Rabobank has done some calculations that for every ten per cent decline in foodservice, retail only goes up three per cent,” Grier explains.

That’s on dollars spent, of course. Which makes sense, because a steak dinner at a restaurant is going to cost a lot more than that steak dinner prepared at home. Grier adds that he also did some calculations and retail business is up 20 to 25 per cent. “That coincides with a lot of the trade talk. So retail business is not up the same amount the food service is down, because the spending at food service is far greater than at the grocery store. Plus, we spend more with the proteins and such at food services anyways. So it’s not a 1:1 ratio.”

Grier adds the equipment that goes into foodservice and converting the meat into foodservice products isn’t the same equipment that is used for groceries, so logistically, there are issues there as well.

Check out the full conversation with Kevin Grier and RealAgriculture founder Shaun Haney:

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