September 01, 2011
We’ve been saying for some time now that The Great Foodservice Recession led to the biggest declines in the foodservice equipment and supplies market in our lifetimes. It turns out we were wrong.
Not that the double-digit decline of E&S sales in 2008 and ’09 wasn’t dreadful. It was, but it wasn’t as dreadful, or as long-lasting, as we thought. E&S sales last year and so far this year have been quite a bit better than we expected. It’s funny to write this a day after the Dow Jones Index fell more than 600 points, but we are quite optimistic about the E&S market the next few years.
So what led to this revised history? The hard numbers don’t lie. We are fortunate that we now have real numbers upon which to base our estimates and forecasts of the E&S market. We start with The North American Association of Food Equipment Manufacturers’ biennial “Size & Shape of the Industry” study to give us base market numbers. Meanwhile, our long-time forecasting partner John Muldowney, v.p. at Alto-Shaam, analyzes reports and then trends revenues from seven publicly held E&S companies. In addition, we consult the quarterly Business Barometer fielded by The Manufacturers’ Agents Association for the Foodservice Industry, and we track sales of the Top 100 E&S Manufacturers and Top Dealers.
All those number show very clearly that E&S market sales turned positive in ’10. Our original forecast for last year had the market off as much as 6% in nominal terms. But the public-companies revenues went positive in the second quarter in ’10 and have been running between 5% and 10% positive since. The MAFSI Barometer finally broke into growth territory during the fourth quarter last year, up 5%. That indicator has also been positive since, up 4% in first-quarter ’11 and another 5.7% in the quarter ended June. The Top 100 Manufacturers grew 3.9% last year; the Top Dealers 1.4%.
The upshot is that we had no choice but to revise our estimate for ’10 total industry sales to a nominal gain of 1.4% and a real gain of 1.2%. And this means the E&S market downturn lasted “only” two years, with a cumulative decline of 16.4% nominal and 15.6% real.
With all that in mind, we also took our forecasts for ’11 and ’12 higher, to 4% and 4.7% nominal respectively. Real growth is forecast at 2.2% this year and 2.6% next. And we see real growth lasting out through ’15 as well.
So the E&S market declines during The Great Foodservice Recession were not as bad as those during the interest rate recessions of 1980 through ’82, when the market was off nearly 25%. Small comfort for those of us who have lived through the past three years, but comfort nonetheless.
If you’d like to purchase the entire FER E&S Market Forecast, all seven PowerPoint decks, drop us an e-mail.