FAST FOOD SECTOR DELIVERS LUKE WARM PERFORMANCE
It seems that a tough economic climate which is putting more and more pressure on consumer spending and households’ disposable incomes is starting to put the brakes on fast food – a sector that soared both during and after the Covid-19 pandemic, according to John Loos, property strategist at FNB Commercial Property Finance.
He pointed out that the growing take-away, fast food and food deliver culture was registering slower growth according to the May 2022 Stats SA Restaurant, Take-Aways and Catering Income data that was released this week.
“Restaurant and Take-aways data for May 2022 points to “solid but slowing” growth in tougher economic times after the “Fast Food and Take-Aways” category made huge inroads through the lockdown period, he said.
The May 2022 Stats SA Restaurant, Take-Aways and Catering Income data showed further slowdown in year-on-year growth in revenues after a significant post-lockdown recovery. Total Food and Beverage Income for the sector grew by 14.5% year-on-year in May, which is still solid, but slower than the 18.8% rate for April and the fourth consecutive month of growth slowdown.
“More important, when assessing performance these days, is to compare recent levels with levels of sales in the pre-lockdown year of 2019. Here, the picture looks less solid. The May 2022 income level for this sector being -7% below that of May 2019. In inflation-adjusted “real” terms, this is still a very significant -17.2% below the May 2019 level (inflation adjusting using a Hotels and Restaurants CPI),” Loos explained.
When Loos split the data up into the three sub-sectors, he came up with further insights, pointing to a strong shift towards a far greater “take-aways” culture over the Covid-19 lockdown period.
“All three sub-sectors – “Restaurants and Coffee Shops”, “Take-Aways and Fast Food” and “Catering”, have been growing solidly of late and all three have recently seen growth slowing as the economy comes under increasing pressure. However, when inflation-adjusting the sectors’ revenues and comparing with May 2019, we see starkly contrasting pictures between the 3 sub-sectors,” he noted.
It emerges that Take-Away and Fast-Food outlets’ incomes have massively outperformed Restaurants and Coffee Shops, as well as the Catering, category.
Real income of the Take-Away and Fast-Food category is a strong 37.4% up from May 2019 in real terms.
Restaurants and Coffee Shops by comparison are -29.2% down in real terms from May 2019 while Caterers are an even more extreme -38.4% down over the same period.
Loos said the data pointed to two key trends emerging. “Firstly, growth in the overall Restaurant, Take-Away and Catering Sector is showing signs of slowing, albeit still solid in recent times. This has been expected, firstly due to the normalization of activity following lockdowns having more-or-less been completed.
“Secondly, some negative economic events are likely beginning to force consumers to reprioritize expenditure partly away from non-essential spend such as eating out and take-aways. These events include rising general inflation, especially in the area of petrol prices, as well as rising interest rates, and a slowing economy constraining household income growth,” he said.
Loos added that that, nevertheless, the data has been pointing to a “structural” shift towards a greater take-away/fast food/convenience culture, also probably boosted by improved delivery capability of many outlets.
“Post-Covid 19 lockdowns, therefore, consumers appear far more about convenience and speed, and take-away/fast food outlets cater more for this.
“The sharply weaker performance in sit-down restaurants and coffee shops since prior to Covid-19 has arguably put retail centres with a greater focus on this at a relative disadvantage. A focus on the Fast Foods and Take-Aways category through the Covid-19 period appears to have been significantly more advantageous,’ he said.