Foodservice Equipment Reports Fortnightly

Welcome to FER Fortnightly Online Newsletter
March 22, 2005

Regulatory Report:
Sponsored by: APW Wyott Innovations

Kentucky Schools Dodge Fryer Bullet, For Now
Backlash Starts Against Wisconsin Push For County Inspections
Arkansas Gets First New Food Code In 30 Years
Program Lights Up East Bay Restaurants

Industry Report:

Simon Receives FEDA’s Top Award; McDonough Honored For Industry Contributions
NRA Launches Kitchen Innovations At Show
MAFSI Appoints 2005 Officers
NAFEM Announces New Directors
Fortnightly Debuts Regulatory Archives
Alegacy On The Move
Edward Don & Co. Mourns Adam Don

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In This Section:
NAFEM Sales Index Posts Strong Gains For Quarter, Year
Big Chains Same-Store Sales Gains Continue
Blue Chip Consensus Raises GDP Growth Estimate
Europe Continues to Struggle, Japanese Economy Improving

This issue's Regulatory ReportSponsor: APW Wyott Innovations Industry Report

Industry Report Sponsored by Hatco Corp.

NAFEM Sales Index Posts Strong Gains For Quarter, Year
Without question, 2004 proved to be a good year for sales of foodservice equipment, supplies and furnishings. According to the Chicago-based North American Association of Food Equipment Manufacturers' Industry Index, North American sales rose 7% in ’04; export sales soared a whopping 18.4%.

This follows sales declines of 3.9% in North America and 11.6% in international markets for NAFEM manufacturers in ’03.

As is seasonally typical, North American sales were off in the fourth quarter, down 8% compared to a very robust third quarter. Still, fourth-quarter figures represented a strong 10.7% gain over year-earlier numbers. International sales rose 10.6% in the fourth quarter versus the third.

Every quarter in ’04 registered gains over year-earlier figures. The rebound came after three straight quarters of decline in ’03.

While sales have been healthy, manufacturers’ profit margins have been severely undercut by rapid escalation of key materials costs throughout last year and continuing into this year.


Big Chains Same-Store Sales Gains Continue
It is really quite remarkable: It’s now 86 consecutive weeks, dating back to July 2003, that the more than 50 major quick-service and mid-scale restaurant chains tracked by NPD Foodworld’s SalesTrac study have posted combined same-store sales gains. In fact, by the time you read this, it will probably be 88 weeks.

"It’s been an amazing run," said Michele Schmal, NPD’s v.p. of product management in foodservice, and a speaker at both FER’s MUFES ’04 and ES3 meetings. "It’s just kept going and going." The average increase during the 86 weeks has been 4.4%. Sales for the week ending Feb. 21 were 4.6% ahead of the same week the year before.

Schmal attributes the gains to aggressive new product development, new promotions and new ads by the biggest players, responding to the traffic downturns of ’02 and ’03. "The industry is giving people more choices and making it easier to a get a better variety of food at very affordable prices," she said. But the beneficiaries mostly have been the big chains. They have taken three points of traffic share from independent operators since ’01. Smaller chains have maintained their share, but not grown it. Schmal said the interesting thing will be to see whether these expanded offerings get more people using more restaurants, including independents.

NPD’s SalesTrac analyzes same-store sales by segment and category based on data obtained from the participating chains, unlike other NPD products, such as CREST, that rely on consumer panels. The aggregated information is reported back to subscribing operators and manufacturers. Information on Rosemont, Ill.-based NPD Foodworld’s products can be obtained at

Blue Chip Consensus Raises GDP Growth Estimate
With real growth in gross domestic product coming in stronger for the fourth quarter of 2004 than previously reported, and retail sales, industrial production and other short-term indicators telegraphing higher than expected growth in the first quarter of ’05, the economists surveyed by Blue Chip Economic Indicator have ramped up their forecast of GDP growth this year. The consensus now stands at 3.7% on a year-to-year basis for ’05, up a tenth-point from the February forecast. The forecast for nominal GDP growth was raised 0.2 points to 5.8%.

Retail sales, industrial production other than autos and auto parts, business investment and corporate profits are all tracking a stronger pace so far in ’05 than forecast. Non-residential fixed investment is now projected to grow 9.9% this year, up 1.1 points from last month’s consensus.

The most surprising element of the latest forecasts is that the economists did not raise the consensus forecast of inflation. The Consumer Price Index forecast for the year remained constant at 2.5%, despite big recent run-ups in both energy prices—gasoline prices as we went to press are approaching records—and the core rate of inflation. We can all probably expect an upward revision in next months forecasts.

Europe Continues to Struggle, Japanese Economy Improving
Most of the major European economies continue to be plagued by sluggish growth or even contraction, as the strong Euro and structural issues continue to take a toll. Growth in the countries using the Euro, the so-called Eurozone, managed only 0.2% real growth in gross domestic product growth for the fourth quarter of 2004. Germany, Italy and the Netherlands, the three biggest players other than France, were all in negative territory for the quarter. France and Spain did better, with quarterly real growth of 0.7% and 0.8%.

Consumer spending has been held down by worries about employment. As the strong Euro has constrained exports, Germany’s unemployment rate hit a post-World War II record in February. The situation has prompted the Blue Chip Economic Indicator consensus to cut its forecast of Eurozone real GDP growth to 1.6%, down a tenth of a point.

Japan, on the other hand, appears to be coming out of its doldrums. After three negative GDP quarters last year, both household spending and job growth have advanced in early ’05. The current consensus forecast is 1.2% growth for the year.

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