Foodservice Equipment Reports Fortnightly

Welcome to FER Fortnightly Online Newsletter
March 24, 2009

Regulatory Report:
Sponsored by:
Manitowoc Foodservice
ADA Changes On Hold Pending Review
Kentucky Intros Calorie-Posting Law...
...While Court Upholds NYC's Rule...
...Opening Floodgates To More Legislation?
Bay Area Big On Banning Foam; Monterey The Latest

Industry Report:
Sponsored by:
Server Products
Ali Group Names Nerbonne To Head North America Operations
NAFEM Elects New Board Members
CFESA Elects Board Members, Officers
Buffalo Wild Wings, McDonald's CEOs Win Silver Plates

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In This Section:
New Survey Shows E&S Suppliers Less Pessimistic Than Most
FER Revises 2009 E&S Forecast Down Sharply
Many Public E&S Companies Report Big Declines In Q4 '08
'Great' Recession Expected To Be Longest, Deepest Since WWII

This issue's Regulatory ReportSponsor: Manitowoc Foodservice
Industry ReportSponsor: Server Products
Economic Report Food&HotelVietnam2009

By Robin Ashton

New Survey Shows E&S Suppliers Less Pessimistic Than Most

It's one of those glass half-full or half-empty deals. A new exclusive survey from Prime Advantage, an organization that pools the purchasing power of equipment and supplies manufacturers, as well as industrial manufacturers in several other segments including packaging, material handling, food processing and constructions, shows the buying group's members are more optimistic than many other manufacturers about prospects for 2009. But that doesn't mean they are optimistic.

The survey compares responses from Prime Advantage members to results from similar surveys done by three groups—CFO magazine/Duke University, the consulting firm McKinsey & Co. and Bank of America. The Prime Advantage survey was conducted the first two weeks of January.

First, the Prime Advantage results: A majority, 55%, were less optimistic about the U.S. economy than they had been last quarter of 2008, while a large minority, 45%, were less optimistic about their company's own financial prospects. On another topic, 69% said they'd not been affected by the cost or availability of credit.

But those results were better, if better's the term, than the numbers out of the CFO/Duke survey. In that one, conducted in December, 81% of respondents were less optimistic about the general economy and 70% were less optimistic about their own company's prospects. On the topic of credit, just 52% said they'd not been affected by its cost or availability.

In answer to another key question, 45% of Prime Advantage members said they expect the economy will begin to recover in third-quarter '09, but another 31% reported they didn't think that turn will come until first quarter of '10. Again, these responses were more optimistic compared to other surveys


Section sponsored by Food&HotelVietnam2009

FER Revises 2009 E&S Forecast Down Sharply
With public equipment and supplies companies reporting dreadful results for last year's fourth quarter, the Manufacturers' Agents Association for the Foodservice Industry's monthly Business Barometer hitting record lows, and some manufacturers anecdotally citing double-digit declines during the first two months of 2009, Foodservice Equipment Reports has revised its '09 E&S market forecast sharply downward.

The new forecast predicts total industry sales at the manufacturers' level will decline 13.9% in real terms in '09. Estimated real sales for '08 are also revised down to -4.1%. The previous revisions, made in October, were for negative real sales of 3.5% in '08 and 3.8% in '09. Real sales in '07 grew a positive 1.9%.

"We honestly haven't seen a market this stressed since at least '90-'91 and probably '80-'82," FER Publisher Robin Ashton said. The forecasts are prepared by Ashton and John Muldowney, principal at Clarity Marketing, Tipp City, Ohio.

A completely updated forecast PowerPoint, including the latest data on macroeconomic, operator, material and pricing trends, as well as the forecast itself detailing nine product categories, is available for $299 by e-mailing Jessica Scurlock at or by calling the office at 800/986-9616. Those who have participated in FER forecast seminars or have purchased the forecast during the past year, will be e-mailed the new deck shortly.

Section sponsored by Food&HotelVietnam2009

Many Public E&S Companies Report Big Declines In Q4 '08
The severe downturns in the economy and in foodservice finally caught up with the public equipment and supplies companies in the fourth quarter last year. According to figures compiled by John Muldowney, principal at Clarity Marketing, Tipp City, Ohio, organic blended sales (minus acquisitions) at five primarily equipment companies and two supplies companies fell 12% in the quarter, and were down 1% for the full 2008 calendar year. With acquisitions, sales were down 8.5% for the quarter and up 6.5% for the year. In that group, the two supplies-oriented companies in particular really took it on the chin. Blended organic sales fell a whopping 21.7% in the quarter. Sales fell 7% for the year as a whole. With acquisitions, the supplies companies saw sales fall 10.6% for the quarter, but rise 4% on the year.

The five equipment companies fared a bit better, but were still off organically 9.4% in the fourth quarter. They managed a slight 0.7 organic gain for all '08. Including acquisitions (but not blending Manitowoc and Enodis) sales fell 7.9% in the quarter and rose 7.2% for the calendar year.

Most of the publics, except the supplies companies, had shown slight gains through the first three quarters of '08, outpacing the MAFSI Business Barometer, which was negative every quarter for the year. But the chain orientation of several of the public companies apparently caught up with them, as many chains and their franchisees, even strong quick-service chains, reacted quickly to the downturn by slashing capital spending. In contrast, the MAFSI Barometer was off 4.7%, a record decline but still substantially ahead of most of the public companies.

Muldowney noted he will be following two fewer public companies going forward, as Manitowoc completed its acquisition of Enodis in late October, and Middleby finalized its acquisition of Turbochef.

Section sponsored by Food&HotelVietnam2009

‘Great' Recession Expected To Be Longest, Deepest Since WWII
For those of us who like to play fun with numbers, it's fascinating to watch the macroeconomic forecasters at work every month in this maelstrom. Which is one reason we subscribe to Blue Chip Economic Indicators. And this is how Blue Chip's Executive Editor Randall Moore led off the March 10 newsletter: "It is looking more and more likely that the current U.S. recession will not only be the longest in post World War II history, but also the deepest."

The United States has experienced only two 16-month recessions since 1945—one in 1974-'75 and the other in '81-'82—and we will surpass that duration next month (the current recession began Dec. 2007). Blue Chip economists now predict '09 real gross domestic product will fall 2.6%, significantly worse than the '82 decline of 1.9%. In fact, perhaps the most amazing figure is the latest forecast for nominal GDP decline this year of 1.4%. We haven't seen anything like that since '49.

The things we really look at in the macro forecasts—disposable income growth and personal consumption spending—are dreadful. The consumption figure is expected to fall 1.5% in real terms this year, the biggest drop since '42. And small wonder: The economy has shed more than 4.3 million jobs in the past 15 months, and economists expect the losses to go on for months.

Still, one can find glimmers of hope in the numbers. Economists still expect the general economy to turn positive in the third quarter, if barely, and real GDP to grow nearly 2% next year.

Tough as things are in foodservice, they're tougher in the housing and auto industries. The Blue Chip consensus forecasts just 560,000 housing starts this year, down from two million-plus in '05. And automakers are expected to sell 10.3 million cars and light trucks in '09, off a cliff from an average of 16.5 million from '05 to '07. Given the value of all those houses and cars, it's truly amazing the GDP numbers aren't worse.

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