Earnings paint food demand picture: higher grocery sales and restaurants in a world of hurt

First quarter financial reports are starting to paint a clearer picture of the impact the COVID-19 pandemic, and the subsequent government restrictions, have had on food demand.

Restaurant sales — no surprise — have plummeted, and been replaced to a lesser extent by higher staple grocery sales.

Tim Hortons, A&W, and McDonalds have all reported major declines in sales, despite still offering drive-thru, delivery, and mobile ordering options. Meanwhile, the likes of Loblaws and Sobeys are reporting increases in food sales at their grocery stores, particularly in the latter half of March and early April.

Here are some highlights pulled from publicly-traded food and restaurant companies’ quarterly earnings reports, most of which have been released over the last week:

Tim Hortons

Tims has been hit hard. Daily sales at Tim Hortons restaurants were down by a percentage in the mid-40s in the last two weeks of March versus last year, reported Tims’ parent company Restaurant Brands International (RBI) on May 1. Those numbers have improved very slightly, and were down in the negative high-30s as a percentage as of the end of April. Breakfast sales have been especially difficult, as many customers are not driving to work. The company says it is focusing efforts on assuring customers it will be safe to return, with new measures, including a touchless “payment pole” to pass credit-card machines to drive-through customers, and a “hollowed-out hockey puck”-like tool to put lids on coffee cups without touching the lid.

A&W Canada

A&W’s numbers also show a dramatic decline, with total sales in Canada since March 13 — the timeframe when social distancing rules were put in place — down around 42 per cent versus last year, as of April 29. Despite having positive same-store sales growth in January and February, A&W Canada’s first quarter same-store sales growth ended up down 4 per cent versus last year.

McDonald’s

McDonalds didn’t share specific numbers for Canada in its Q1 report on April 30, but the company reported a 17 per cent drop in first-quarter earnings globally. U.S. same-store sales fell 25 per cent from mid-March to mid-April, but the company was expecting numbers to improve slightly, with same-store sales for April down around 20 per cent. The company says drive-through sales accounted for around two-thirds of sales in the U.S. prior to COVID-19, and currently accounts for around 90 per cent of U.S. sales. As noted with Tim Hortons, breakfast sales have been most challenged. president and chief executive officer Chris Kempczinski also said McDonalds will be focusing on core menu products due to customer interest in familiar favourites and to streamline operations.

Boston Pizza

The only non-fast-food company on this list, Boston Pizza says its same-restaurant-sales since March 18 have declined by around 75 per cent, as of May 4. Sales for the first quarter of 2020 were down 16 per cent overall.

Burger King

The fast-food burger chain sister (brother?) company to Tim Hortons (also owned by RBI) saw daily sales in the last two weeks of March drop by an average percentage in the low 30s. (Keep in mind RBI owns Burger King restaurants around the world, and BK is not Canada-focused liked Tims.) Sales have since rebounded, and were in the negative teens on a percentage basis versus last year at the end of April.

Loblaw

Canadian grocery giant Loblaw Companies reported retail sales of $11.6 million in the first quarter, which ended March 21 — an increase of 11 per cent over last year. Same-store sales growth for food was up 10 per cent, while pharmacy sales through Shoppers Drug Marts were up 11 per cent. In the five weeks following the end of the first quarter, Loblaw says its food retail was up approximately 10 per cent, while drug retail was down by around six per cent versus last year. The company says customers also spent less on discretionary items.

Empire (Sobeys)

Sobeys’ fiscal third quarter ended February 1, so there hasn’t been an earnings report affected by the pandemic, but parent company Empire has shared an update regarding COVID-19. Sobeys’ same-store sales for the four-weeks start March 8, excluding fuel and Easter, were up around 37 per cent, with initial demand skewed toward “shelf stable” grocery items. The company says its sales mix has returned to more usual levels, but is still seeing heightened demand for canned goods, baking supplies, and cleaning/sanitization products. Same-store sales in the two weeks before Easter were up 24 per cent, while the company says fuel sales have dropped around 40 per cent since March 1.

Metro

Canada’s third-largest food retailer is also reporting significantly higher food revenue at its stores in Quebec and Ontario, with same-store food sales for the four weeks ending April 11 up 25 per cent versus a year ago.

Kellogg

Kellogg Company reported huge increases in packaged food sales in March as part of its quarterly earnings release on April 30. Breakfast cereal sales in the U.S. were up 43 per cent in March, while Eggo waffle sales soared 45 per cent. Cracker sales in the U.S. were up almost 30 per cent in March.

Maple Leaf Foods

The Canadian protein company reported Q1 meat protein sales growth of 13 percent last week, driven by strong retail volumes and higher sales to Asian markets. Maple Leaf’s plant protein businesses (Lightlife and Field Roast Grain Meat) saw sales growth of nearly 26 percent. The company says it expects continued strong demand from its retail channels, as well as Asian markets, going forward, while acknowledging the potential for further production disruptions. (Maple Leaf has temporarily closed/slowed down production at some of its plants.)

So many questions still remain about how quickly the food supply chain has been or will be able to divert food products originally meant for food service and restaurants into the retail supply chain, as well as how quickly restaurant and food service demand will return — how soon will people be willing to go out to eat, even after governments lift restrictions? Companies are reporting consumer preferences for well-known, familiar products and brands during the pandemic — will that continue, and how will that affect new products or non-chain restaurants?

The answers to these questions are yet to be determined, and this information is far from complete. For example, it doesn’t necessarily come close to describing what’s happening with smaller, local restaurants and food businesses. But we are starting to see trends emerge in how the pandemic is affecting general food decisions, as the balance between retail and food service demand has tilted sharply toward retail channels.

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