PUBLISHER'S VIEWPOINT
October 2002
Coming Up For Air

I hate waffling economies. But it’s what we have right now. And I hate the timing of the waffling for selfish purposes. I like things to be looking up as the sales folks and I head out for ad contract season. But the waffles are hard to ignore.

A couple weeks ago, I put together my first “preliminary” forecast for the equipment and supplies market in 2003. And I was reasonably positive about next year. Then I went to Utah for our first Multiunit Foodservice Equipment Symposium (you’ll get a full report on the meeting next month) and listened to our opening keynote speaker Bob O’Brien from NPDFoodworld. He said operator traffic and sales were weak in the first half and that since August, both have actually trended negatively.

He also confirmed what we’ve been hearing from operators all year: Smaller and midsize chains are having problems finding financing. Sure, interest rates are at their lowest levels in years. But no one is willing to actually lend money. The bigger chains that are self-funded for development are doing okay—though they too are cautious about adding seats—but smaller folks are putting off new units.

The independent market—and the dealers that depend on them—are even more severely affected. O’Brien reports that independent segments have lost net units over the past two years, though many units “churn.” That means one closes and a new concept opens in the same building.

And things are not a whole lot better on the noncommercial side. The dragging economy has led to lower tax receipts. State and local budgets are severely squeezed. School, college and prison capital budgets have been hit in many parts of the country. My consultant friends tell me they are still busy drawing, but they are not sure whether some of the projects will go out to bid.

I talked to Joe Pawlak from Technomic this morning. His firm estimates operator sales will be negative in real terms for ’02 at -0.3%. Technomic is more positive for ’03, projecting real growth of 0.8%.

So, should we shoot ourselves? Heck, no. Despite waffles, despite impending war, I actually believe ’03 will be better for most in the E&S market. We’ve been down or flat for more than two years. Pent up demand begins to build. And the Blue Chip Economic Indicators folks are mildly optimistic about next year.

So I’m going out on the limb and betting we’ll see real sales rise a point or two in the year ’03. I’ll let you know if the bough breaks.

Cheers,

Robin Ashton
Publisher