This issue's Regulatory Report

Industry Report

NAFEM Indices Show Strong First Quarter Fueled by a solid domestic market, price increases and a roaring market in Asia, North American foodservice equipment and supplies manufacturers reported very strong sales increases in the first quarter of 2005. The data, reported as part of the Industry Index Program run by the North American Association of Food Equipment Manufacturers, show North American sales rose 11.8% vs. year-earlier figures and 6.1% over fourth quarter '04. Export sales were up a whopping 26.8% over same-quarter '04 and 3.8% compared to the previous quarter. Without question, these are the strongest first quarter gains seen in the business since before '01. While some of the gains are certainly augmented by price increases, there is no question real sales gains in the first quarter were very strong. The NAFEM numbers are in line with those reported by many large public E&S companies. As reported two weeks ago, John Muldowney at Clarity Marketing charted gains by six large public equipment companies at a blended 13.3% for the first quarter vs. the same period in 2004. Large public supplies companies were flat to slightly lower, however, reflecting what may be slower recent operator sales growth.

Technomic Calls Climate For Industry Growth 'Positive'
Citing favorable disposable income and employment growth outlooks, Chicago-based research and consulting firm Technomic Inc. forecast restaurant operators will see solid real growth through the remainder of 2005 and into '06. The research group's preliminary '06 forecast, among other data, was presented at its "Restaurants 2006 Trends & Directions Conference," held June 22 in Rosemont, Ill.

Technomic Pres. Ron Paul noted that "the industry is experiencing its strongest growth over a two-year period since 1998-'99." And while Technomic expects some slight moderation of the growth rate in '06, the "trends remain very positive." Paul did point out the downside risks of waning consumer confidence and inflation worries, but noted so far these are outweighed by the positives.

The forecasts call for real growth in restaurant operator sales of 3.0% this year and 2.8% in '06. Menu price inflation is predicted at 3.2% this year and 3.0% next. These gains come on the heels of revised 4.2% real growth in '04.

Led by strong growth in casual dining segment and a moderation of the very robust growth rates posted during the past two years by quick-service chains, full-service will grow a bit faster than quick-service this year and next, the forecast states.

The conference also featured the release of new psycho-analytic research fielded by the group that charts the different ways consumers use foodservice depending on their moods and occasion needs.

Information on Technomic Inc. research products is available at www.technomic.com or by calling 312/876-0004.