Foodservice Equipment Reports Fortnightly
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Welcome to FER Fortnightly Online Newsletter
June 3, 2008








Regulatory Report:
Sponsored by:
Enodis
Taco-Truck Battles Heating Up Coast To Coast
'Quick Draw'In Georgia No Longer Just About Beer
Texas Town Says 'Hasta La Vista' To Smoking
Chicago Saves Goose That Laid Golden Liver

Industry Report:
Sponsored by:
Server Products
CPUC May Energize Energy Savings With More Loans
NAFEM Offers Heads-Up On Reservations Come-Ons
NRA Salutes Military Foodservice At Joint Services Breakfast
NRA Launches Green Initiative



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In This Section:
Technomic Revises 2008 Operator Forecast Down Sharply
Final First-Quarter E&S Public Company Numbers Not Quite So Rosy
Heard In The Aisles At NRA: Enodis Acquisition Giddiness, Equipment Market Okay So Far, Supplies Feeling Slowdown
Save Money. Register For FER's President's Preview Forecast Seminar

This issue's Regulatory ReportSponsor: Enodis
Industry ReportSponsor: Server Products
Economic Report Manitowoc Foodservice Group

Technomic Revises 2008 Operator Forecast Down Sharply
Citing exclusive consumer and operator research that suggests the foodservice market is weakening even more than expected, Chicago-based research and consulting firm Technomic Inc. has revised its forecast of operator sales growth in 2008 down sharply.

The new forecast, released last month, projects total foodservice sales will decline 1.7% in real terms this year. The previous revision, made in January, had real growth off 0.4%. Both forecasts use menu-price inflation of 4%. If the Technomic forecast is accurate, the year will be the most difficult one for foodservice in more than three decades.

A key piece of research that Technomic V.P. Joe Pawlak said influenced the revision was a survey of consumers the firm conducted in April. The survey clearly indicated most consumers planned to save their tax rebate or use it to pay down debts. Fewer than 10% of respondents said they'd spend the rebate on foodservice. Other surveys showed operators are much less optimistic than at this time last year and that a majority of operators report sales are flat or negative compared to last year.

"Bottom line is that consumers are spending a lot less, and traffic is down," Pawlak told FER Fortnightly. "Consumers are cutting back because of the slowing economy and [weakening] disposable personal income, [which are] caused by stagnant wages and higher costs overall driven by fuel."

The revision forecasts full-service restaurants will see only 1% nominal growth this year, all of it driven by higher menu prices. That translates to a 2.9% real decline. The new forecast also dropped quick-service restaurant sales to a 1% real decline from a 1% real gain in January.

Interestingly, the declines are driven more by lower sales than traffic fall-off, as consumers continue to depend on foodservice. "We don't think traffic will be down considerably overall," Pawlak said. "Consumers will move from higher check-average venues such as full service, and trade down to venues like limited service. Supermarket foodservice will also benefit considerably, as many supermarkets have re-engineered the prepared foods areas and offerings to the point where they are seen as appropriate away-from-home options." Supermarkets, along with schools and recreation, are among the very few segments forecast to show real growth in '08.

For more information on the forecast and other Technomic research, click on www.technomic.com.


 

Section sponsored by Manitowoc Foodservice Group

Final First-Quarter E&S Public Company Numbers Not Quite So Rosy
Final equipment and supplies public-company numbers for the first quarter of 2008 were not quite as rosy as we first thought they'd be based on a small number of early reports. The final numbers, compiled, blended and analyzed by our forecasting partner John Muldowney at Clarity Marketing, Tipp City, Ohio, show blended organic sales growth was just above flat at 0.3%. All numbers are versus first-quarter '07 and do not reflect the impact of price increases

But the blended numbers were impacted by double-digit declines at two of the nine companies. The other seven companies in the analysis showed organic gains of at least 2%, with two companies in fast-growing product categories again reporting double-digit growth.

Overall, the seven equipment-oriented publics had organic growth of 1.9% and reported growth, including acquisitions, of 10.6%. The two supplies companies reported a decline of 6.1% organically and growth of 4.2% with acquisitions.

"It looks like the 'like-for-like' performance, as they say, for the first quarter was pretty flat," Muldowney said. He noted this is more in line with the 1.2% first-quarter decline reported by the Manufacturers' Agents Association for the Foodservice Industry's Business Barometer and operator sales and traffic trends.


Section sponsored by Manitowoc Foodservice Group

Heard In The Aisles At NRA: Enodis Acquisition Giddiness, Equipment Market Okay So Far, Supplies Feeling Slowdown
We try to stick with hard numbers in Economic Report, but anecdotal information has its value. The two topics on everyone's lips at the recent National Restaurant Association show were 1) How's business? and 2) What do you know, think, expect of the Manitowoc and ITW bids for Enodis? And which company will win?

As to the latter, we know nothing that isn't part of the public record. And given the way the back-and-forth has played out, who knows who will end up with the winning bid or even have the highest bid by the time this issue appears?

What we do know is that the competing bids indicate the companies involved and the financial markets that support them are showing great confidence in the foodservice equipment market and the market's potential for growth, even in the midst of a slowing economy. We've argued for some time that foodservice equipment has become increasingly noncyclical—remarkable for what is, after all, a capital goods market, and that the potential for growth in both the short and long terms is very good, given the growth of international markets, the need to replace aging equipment in the maturing U.S. market and technological developments' impact on menus and energy efficiency.

We discussed this at the show with a number of those involved at the three companies, as well as with other leading E&S conglomerate executives, and they all nodded their heads. After all, those involved can't say a word by law.

As to how's business, the equipment-company folks we spoke with said sales are holding up or softening only a bit. The supplies companies, on the other hand, especially those tied to casual dining chains or street business, are feeling the effects of the slowdown in their customers' business. And everyone is worried by the continuing run-up in the prices of gasoline and food and their continuing impact on disposable income and foodservice traffic.

This is not an unusual pattern, given what we know about the market and its typical behavior in a slowdown. Supplies sales are always more sensitive to operator trends, and equipment-sales trends lag any down- or upturn. We were actually surprised that more equipment companies haven't seen dramatic slowing. We'll now just have to wait and see how long and deep the slowdown is.


Section sponsored by Manitowoc Foodservice Group

Save Money. Register For FER's President's Preview Forecast Seminar
You only have a couple weeks to catch the early-bird discount for Foodservice Equipment Reports' annual President's Preview Equipment And Supplies Market Forecast meeting. The seminar will be held at the Eaglewood Resort and Spa in Itasca, Ill., on this coming July 30. Sign up by June 20, and the early-bird fee saves you $100.

The meeting features the magazine's hard-number forecasts for E&S market growth in 2008 and '09 and includes a wealth of data on general economic, operator and materials and E&S price trends. It kicks off with a panel of leading multiunit operators discussing trends driving their businesses.

The meeting program is one day, with a mid-morning start, so most attendees can fly in and out the day of the meeting. A limited number of hotel rooms at Eaglewood is also available for July 29. Seminar fee is $845 before June 20, $945 after.

Information on registration and the hotel is available at www.fermag.com/events/index.htm or by calling Jessica Scurlock or Robin Ashton at 800/986-9616.



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