Restaurants, grocers reap solid growth in May

Posted by Daniel Palmer on 1st July 2009

The latest data from the ABS has shown restaurants, take-away outlets and cafés record seasonally adjusted growth of 1.4 per cent in May, outstripping the rise in sales of 1 per cent seen in the food retail sector (which includes specialty food retailers, grocers and supermarkets) and the retail sector at large.

Restaurants

The result overturns a 0.5 per cent decline in seasonally adjusted sales for restaurants, cafés and take-away outlets and suggests consumers were inclined to spend some of their stimulus payments on eating out.

Restaurant and café owners have been among the hardest hit by the economic downturn in Australia while many fast-food businesses have been able to capitalise on what has been dubbed as a ‘trading down’. However, there have been signs that restaurants have seen the worse pass by – an assertion supported by today’s retail data.

Before the crisis reached Australia there were suggestions that the restaurant sector was better equipped to cope with a recession that in 1990/91 due to eating out becoming less of a discretionary option to the average Australian consumer and more of a lifestyle choice. Past research into the impact of recessions on restaurants also offered some hope as the number of restaurant visitors has often been seen to rise – albeit more moderately. And, as it has turned out, many restaurants have noted that consumer levels have not fallen away drastically but the spend per customer has been a drag on sales figures.

Take-away outlets

Fast-food has been a resilient sector, lead by some of the industry heavyweights who have consistently posted strong results. The low cost, high convenience mantra pushed by fast-food retailers struck a chord with consumers intent on keeping costs low while still craving the convenience of a quick meal. The consumer desire for comfort food has also ensured insulation from the economic turbulence for the take-away sector.

Food retail

Food retailing, led by the supermarkets, has remained robust throughout the past year solidifying its position as a defensive, recession-resistant area. The 1 per cent rise in the seasonally adjusted figure more than countered a 0.2 per cent decline in April – before adjusting for inflation.

Almost all of Australia’s supermarket chains have reported higher sales this year, including Coles, Woolworths, IGA, Franklins, Aldi and FoodWorks.

Industry response

The Executive Director of the Australian Retailers Association, Richard Evans, believes the one per cent lift in overall retail sales is a good sign for the economy.

“Looking back over the past months, there has been solid retail trade growth in each month, with the exception of February which is traditionally the toughest month for retailers,” Mr Evans noted. “The May retail trade reflects the rise in consumer confidence and other positive indicators including the Government’s economic stimuli and the RBA’s interest rate cuts from late last year flowing through.”

“A new type of consumer is beginning to re-enter the market – this is a consumer who is cashed-up and ready to spend without guilt after months of apprehension about letting go of discretionary spend.”