Food retail flourishing, but restaurant growth remains stagnant

Posted by Daniel Palmer on 4th February 2009

The latest ABS retail data has shown food retailers had their best ever festive season, with this year’s December sales 7.7 per cent higher than corresponding figures last year. Cafés, restaurants and take-away stores were not as fortunate, however, with a meagre 0.06% rise on sales figures from last December.

It continues the trend of food retailing, which includes supermarkets and specialty food stores, far outstripping the sales growth of the restaurant, café and take-away sector as predictions of trends toward more consumers eating at home appear to proven correct.

Food retailing was again among the top retail performers and expanded above overall retail figures even after accounting for the high food inflation rate of 5.6% for the year. With food inflation at such extremes the pressure on some in the restaurant industry is likely to be intense, with fine dining anticipated by analysts as the pressure under the most stress as consumers “trade down”. Fortunately for the sector, the number of new entrants to the fine dining scene has fallen compared to previous years as casual dining has commanded more attention and future prospects are sound as there is inevitably strong growth at the end of a recession.

“The ABS retail figures for December show the first cash bonus and the cumulative effect of the interest rate cuts has boosted retail sales by 3.8%, the biggest monthly increase since the GST was introduced,” CEO of the Australian National Retailers Association, Margy Osmond, said. “Spending in December was up $1 billion compared to December 2007 and that’s helped salvage 2008 for retailers. Over two thirds of all the growth in retail spending in 2008 came in December, as a consequence of the interest rate cuts and the stimulus package.”

“Sales in 2008 were 4.1% higher than in 2007, but when you adjust for inflation that falls back to 1.6%. (This compares unfavourably to) the average real growth in the retail sector in the last decade (of) about 4%,” Mrs Osmond noted.

Putting the restaurant, café and fast-food outlet sales results in historical perspective; the last time there was a recession in Australia a similar flat growth figure was realised. The December 1990 sales were comparable to those of December 1989 and, positively, sales picked up around 8 per cent the following December. The festive season was again flat for 1992 and 1993, before surging over 10 per cent on the corresponding years in the December’s of 1994 and ’95. And so, while it may seem glum now, there is cause for optimism.