As Canadians flee cities, food sector recalibrates

Grocery retailers must come to terms with serving a shifting population. And restaurants face learning to be more flexible

Sylvain CharleboisCanadians seem to want to flee urban centres. The food industry will need to keep a close eye on the trend.

The real estate market is overheating in regions outside of major cities like Toronto, Montreal, Vancouver and Halifax. Recent real estate reports suggest sales are up 20 per cent in many rural markets and prices have increased by at least five per cent since the start of the pandemic.

Cottage countries are exploding for two main reasons.

First, many people have realized that space can be an issue, especially when dealing with a pandemic. Spending three months in a two-bedroom apartment can make you think differently about space.

Second, telecommuting is an emerging factor. Just six months ago, it was barely on anyone’s mind. Today, according to a recent Angus Reid survey, most Canadians plan or want to work from home regularly in the future.

That means where you live may become less of a career obstacle. People in northern Ontario could work for a company in Regina.

The financial case for telecommuting is also very strong. An employee working from home spends less on clothes, transportation and restaurants. The same goes for employers. Business lunches, team meetings over coffee and dinner meetings aren’t likely to happen as often. Less office space is needed.

Telecommuting also has the potential to disrupt the housing market and how the food service industry coalesces with the housing fabric of communities.

The food service sector has already gone through great upheaval. Some analysts predict the sector won’t even generate 40 per cent of the revenues this year that it achieved in 2019. According to Restaurants Canada, more than 25 per cent of restaurants that closed in March will never reopen. That’s a staggering 24,000 or so of the 97,000 restaurants in Canada. And that number will likely get worse over the next six months.

With telecommuting, regional food service outlets will likely to be the norm, similar to what we see in Europe. Farmers, processors and others can cater to this growing countryside marketplace.

In the past, small country restaurants were fuelled by loyal locals and adventurous urbanites. Given the number of restaurants in any downtown core, driving out of the city to eat isn’t overly attractive.

Standardized menus and experience may be less important for a growing number of customers than it was before COVID-19. Franchises and major chains have made a living through uniformity – McDonald’s, Starbucks, Burger King, A&W and many others. Tim Hortons and Subway have mastered their way to smaller markets, with lower franchise fees and manageable menus.

But major expansion plans for most of these companies may need to be rewritten, as a greater number of Canadians seek refuge in small-town life.

Food retail won’t be spared in this shift. Management costs have gone up as a result of COVID-19. And more consumers are buying groceries online. Both factors will likely lead to the closure of grocery stores.

Performance measures for grocers will focus more on efficiency, safety and public health, and less on brands and market presence. Physical locations will be less of an issue.

As regional populations grow and customers need a place to buy groceries, e-commerce comes in handy. We could see grocers establish pickup stores to support growing rural markets without committing to more costly outlets, which can’t move once built.

Incredibly, despite the economic chaos caused by the pandemic, house prices in most large urban areas have increased from the same period last year. So people leaving cities to telecommute from a more affordable home makes sense. It’s unclear how COVID-19 will impact the real estate market over time.

But if this summer is any indication of what’s to come, the entire food industry is in for a complete recalibration.

Dr. Sylvain Charlebois is senior director of the agri-food analytics lab and a professor in food distribution and policy at Dalhousie University.

Sylvain is a Troy Media Thought Leader. Why aren’t you?

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