PUBLISHER'S VIEWPOINT
August 2005
2005 Sales Up, Prices Up And A Peek At 2006

A number of you, especially manufacturers, have been bugging me for a revised forecast of the foodservice equipment and supplies market. So, I'll give you an idea of what we've seen so far this year and how it looks for next.

In a couple of words, business for most suppliers has been very good. I've heard double-digit good from a number of you through the first half. The public equipment companies, as tracked by my friend John Muldowney of Clarity Marketing, had a very good first quarter.

But the public companies that specialize in supplies and tabletop are a somewhat different story. They were essentially flat in the first quarter and one of them--we never cite names when the news is bad--has publicly said its sales in the second quarter will also be lower than expected. This is a bit worrisome because supplies sales usually track with operator sales quite closely. The latest Restaurant Performance Index (May) from the National Restaurant Association sure enough showed a downturn in traffic and same-store sales and slightly lower expectations of future prospects.

Here's an E&S market guess for '06: 6% to 7% nominal, 3% real. It's reasonable, given what we know now.

I also now have data on price increases, thanks to Kent Motes, president at AutoQuotes. He says blended list price increases for 334 manufacturers, covering more than 200,000 products, rose 5.38% from Sept. 1, 2004 to June 1, '05. This is higher than he thought it would be. It's lower than I thought, given the intense pressure on manufacturers to raise prices to cover soaring materials costs. But, in fact, it's very close to the 4.8% overall industry price increase--remember Kent is tracking list--we forecast late last year.

But we may have underestimated the real gains for '05. Our total industry real growth forecast was "only" 3.3% for a combined nominal growth rate of 8.0%. (They don't add up because of rounding). And I think we're low by at least a couple of points. So here we are at double digit again, say 10% for '05.

What about '06? I think at this early date, it'll continue good without being quite this strong. The nominal will certainly be lower because while manufacturers will raise prices--they haven't caught up yet and stainless remains stubbornly high--they won't be nearly as aggressive next year. The outlook for the general economy and operator sales is similar. Decent, but not quite as good. I'll give you an E&S market guess for '06: 6% to 7% nominal, 3% real. Don't bet the farm on it. It's too early. But it's reasonable, given what we know now.

Cheers,

Robin Ashton
Publisher