Foodservice Equipment Reports Fortnightly

Welcome to FER Fortnightly Online Newsletter
September 20, 2005

Regulatory Report:
Sponsored by:
APW Wyott Innovations

South Carolina Inspection Form Rolls Out To Entire State
Florida Lawsuit Against Smoking Ban Fails, For Now
Napa Puts Inspection Reports Online, Mulls Letter Grades
Pennsylvania Governor Boosts A Boost In Minimum Wage

Industry Report:
Sponsored by:
Manitowoc Foodservice Group

SFM Moves Conference To Miami
Associations Step Up Post-Katrina Efforts
Enodis Donates Funds, Equipment
Starbucks Sees Green In Renewable Energy
Beltram Signs Rosati As New COO
Bargreen-Ellingson Opens Office In Texas

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In This Section:
FER Revises 2005 E&S Forecast, Sees ’06 Growing 2% To 3% Real
NAFEM Says Manufacturer Sales Grew 7.1% In Q2
Blue Chip Economists Trim Forecasts In Wake Of Katrina

This issue's Regulatory ReportSponsor: APW Wyott Innovations Industry ReportSponsor: Manitowoc Foodservice Group

Economic Report Drive To Survive Charity Golf Event

FER Revises 2005 E&S Forecast, Sees ’06 Growing 2% To 3% Real
It’s been a few months coming, but we’ve revised our forecast of 2005 manufacturer sales, and applied the new revised market numbers from the North American Association of Food Equipment Manufacturers’ "Size & Shape Of The Industry" study. An Excel file of the revised forecast and market numbers is available for download at the end of this article, as is our original '05 forecast for comparative purposes.

We’ll discuss the forecast in more detail at a later time, since many of you, like us, are heading to The NAFEM Show in Anaheim. But as a quick overview, we have lowered our forecasts for both equipment and supplies slightly. Our revised estimate of real total industry growth in ’05 is now 2.9%, versus the original 3.3% We also reduced our forecast of price increases to a total 4.1% from 4.8%. Nominal growth for ’05 is now forecast at 7.0%, down from our original 8.0%.

Driving these changes are reductions in growth rates for several categories, particularly refrigeration and ice machines. Based on unit shipment reports from the American Refrigeration Institute, ice machine shipments just went positive for the year in July. We’ve heard from others that refrigeration sales are not growing as quickly as some other industry segments. We’ve also revised downward prep equipment, smallwares and tabletop, based on industry reports from both public and private sources.

And while these reductions may seem unnecessary given the strong growth reported by NAFEM in its Industry Index (see story below), we have two rationales supporting our view: The public companies tracked by John Muldowney at Clarity Marketing are showing lower growth rates than the NAFEM numbers. And we’ve heard sales so far in the third quarter have been somewhat less robust.

On the other hand, sales of primary cooking equipment are booming, driven by menu changes and strong growth overseas by the big quick-service chains. We’ve thus raised real growth to 4.5% from 4.1%. We also revised upward custom fabrication and furnishings sales to 1.9% real from 1.4%.

As to our preliminary forecast for ’06, we noted in the July 26 Fortnightly that we expected 6% to 7% nominal, 3% real. Muldowney thinks "2006 will be a mirror image of ’05." We see some downside factors in the age of the chain sales recovery; gas prices and their affect on restaurant traffic generally; and the uncertain events associated with Hurricane Katrina. Thus, we move our preliminary forecast down to 2% real, and think we’ll see another 3% to 4% in price increases on top of this, so 5% to 6% nominal.

For an insightful look at NAFEM’s new "Size & Shape" study, we recommend the overview by Mike Sherer in the new edition of NAFEM in print.

Original Forecast 2005
Revised Forecast & Market Numbers


Section sponsored by Hatco Corp.

NAFEM Says Manufacturer Sales Grew 7.1% In Q2
Manufacturers continued to report robust sales in the second quarter of 2005, said the North American Association of Food Equipment Manufacturers, as North American sales grew 7.1% compared with the same quarter in ’04. This compares with a huge 11.2% gain in the first quarter. North American sales rose 5.6% versus the first quarter of ’05. Export sales dropped off marginally, 0.7%, versus the first quarter ’05.

Overall sales in North America have risen 9.3% in the first half, compared with the first half of last year. Export sales are up a whopping 18.0% in the first half. In comparison, North American sales growth last year in the first half was 3.4% ahead of ’03; export sales were up 16.6%. Sales were negative in the first half of ’03 versus ’02.

In comparison, the public companies followed by John Muldowney of Clarity Marketing reporting to date show second-quarter growth of 5.8% and first-half growth of 7.5%, a bit less than the NAFEM growth.

Section sponsored by Hatco Corp.

Blue Chip Economists Trim Forecasts In Wake Of Katrina
Leading economists polled by Blue Chip Economic Indicators cut their consensus forecasts for macro economic growth in the wake of high gasoline prices made even worse by Hurricane Katrina.

As Randall Moore, executive editor of Blue Chip put it, "The effects of a sharp rise in energy prices over the past couple of years were already being felt prior to Katrina’s landfall, reducing discretionary spending power, particularly among lower-income households."

The monthly survey of economists, taken just after Katrina hit, show the consensus lowering their forecasts of third- and fourth-quarter 2005 real gross domestic product growth by 0.3 points to 3.9% and 3.0% respectively. Moore predicted further declines in next month’s survey.

Overall GDP growth for ’05 and ’06 were lowered by 0.1 point each to 3.5% and 3.2% respectively. The group also lowered forecasts for many European economies, as well as Japan, South Korea and Taiwan.

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