PUBLISHER'S VIEWPOINT
September 2005
The State Of The Industry

Since this is our show issue for our biennial town meeting--thank you NAFEM, very much--let's take a look at the current state of the foodservice equipment and supplies business. And I don't mean the short-term economic vitality; things are pumping along just fine. Let's look at more qualitative issues.

* The E&S business continues to mature domestically. More E&S is going into renovating and remodeling existing units, less into new construction. In fact, one of the big problems facing operators is how to pay for all the units that need redoing. The building boom is in China, where YUM! Brands, McDonald's Corp., Burger King Corp. and other restaurant developers, including the worldwide hotel groups, are racing to put up units as fast as they can.

One current demand placed on the big guys: be in China.

who increasingly dominate the market. And often the demand is for menu changes. I know this has been going on for years, but I think it's accelerating. One current demand placed on the big guys: be in China. There is also a margin squeeze, normal in a maturing market, and exacerbated the pastcouple years by the big run-ups in materials and healthcare costs.

* Distribution is, indeed, finding its most efficient means. Many dealers haven't made any real money for years. Don't believe me? Just check with Dr. Al Bates, who advises FEDA. Buying groups hid the pain for a decade or so, but manufacturers are chafing. They want something more for their money. Part of the strategy is "preferred" dealer arrangements. Meanwhile, bigger regional dealers, many with a hand in paper sales and/or fabrication for the chains, are bumping out the mid-range folks. And there's also a lot of channel blurring: direct-to-operator deals, products going to select dealers under private label, and dealers competing with manufacturers.

* Other parts of the supply and spec chain are also under stress. The big consulting firms are doing fine, but smaller and independent designers are often not, unless they are very niched. And even if the firm is big, it's still a people business. Reps are always being asked to do more for less. And service agents have their problems, too, including the multiunit nature of foodservice, which still challenges local market structures, in most cases.

So, does all this bring you down? I hope not, because it shouldn't. One of the advantages of hanging around for 25 years, as I have, is you know the business has always had its challenges. We never said it was easy, just more fun than most. Most of us will survive, and prosper. Have a great show.

Cheers,

Robin Ashton
Publisher