Restaurant sector performance strong, but labor and pricing pressures persist

This summer has been relatively good to the U.S. restaurant industry, as most operators are at full capacity after facing service limits due to the COVID-19 pandemic last year. But the industry’s growth could be hampered by mounting inflation, labor shortages, and other operating challenges.

Consumer spending at restaurants soared 32 percent in the second quarter of 2021 compared to the same quarter of 2020, according to research firm NPD Group. Thanks to the lifting of COVID-19 restrictions in many areas, dining inside restaurants or off-premises increased by 22 percent in the quarter compared to the same quarter last year, but fell compared to the second quarter of 2019.

Visits – both dine-in and off-premises – at full-service restaurants rose 60 percent during Q2 2021 compared to Q2 2020, but fell 17 percent compared to the same quarter of 2019, NPD Group said. And dine-in visits to full-service restraints spiked 214 percent in the quarter compared to a year ago, when they declined by 80 percent, according to NPD Group. But despite the gains, full-service restaurant dine-in visits are down 37 percent from the second quarter of 2019, NPD Group said.

“The U.S. restaurant recovery is underway, but it will take time for it to return to pre-pandemic levels fully,” David Portalatin, NPD food industry advisor and author of Eating Patterns in America, said in a press release. “Commercial restaurants overall remain below 2019 traffic levels.”

Quick-service restaurants, which represent 81 percent of restaurant visits in the U.S., realized a gain of 15 percent in visits in the second quarter compared to a year ago, and a 5 percent decline compared to the second quarter of 2019.

“The [quick-service restaurant] segment – ideally suited to today’s new consumer realities – is performing very near pre-pandemic traffic levels, with dollar volumes well ahead of that pace,” Portalatin said. “On the other hand, [full-service restaurants] still face headwinds, such as dining-room capacity restrictions in some places. Even where restrictions are minimal, labor shortages may keep operators from realizing their full operational capacity.”

Those labor shortages are also affecting foodservice distributors including Sysco, which is pausing or delaying service in selected geographic areas of the U.S. due to “unprecedented” labor shortages, Sysco Manager of External Communications Jerry Hereden told SeafoodSource. The Houston, Texas, U.S.A. massivebroadliner “continues to work closely with current and new suppliers to increase product availability,” Hereden said.

“This includes proactively sourcing alternative products so that our sales teams can offer solutions to our valued customers as needed,” he said.

Foodservice companies are also taking a hit with rising seafood prices. Seventeen percent of restaurant operators report that they realized a “big increase” in seafood prices over the past three months and 57 percent said they were hit with general seafood price hikes, Datassential CEO Jack Li revealed during a recent Datassential Outlook 2022 webinar.

Thirty-eight percent of restaurant operators said they are “taking the hit” and absorbing the price increases on seafood, while 43 percent are passing along costs to their customers by raising menu prices.

Notably, nearly 80 percent of operators believe food prices will only get worse through end of 2021, Li said.

“If the supplier can come along and ensure the availability of their menu item at a stable price…you will be welcomed with open arms,” Li said.

Despite the major headwinds the restaurant industry is facing, foodservice industry consultancy Datassential projects continued recovery. Consumer foodservice spending, which encompasses hospitals, corporations, restaurants, and all foodservice outlets, will reach a total of USD 701 billion (EUR 586 billion) in 2021. That spending will surge to USD 771 billion (EUR 655 billion) in 2022, the firm estimates.

However, foodservice spending in 2022 will still not reach the pre-COVID-19 levels seen in 2019, when such spending totaled USD 806.7 billion (EUR 686 billion).

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