Foodservice Equipment Reports Fortnightly

Welcome to FER Fortnightly Online Newsletter
October 3, 2006

Regulatory Report:
Sponsored by:
Franke Foodservice Systems
NYC Won't Wait For Chains To Drop Trans Fat
Des Moines FOG Ordinance Proving Foggy
Another Chicago Suburb Eyes Smoking Ban
Marriott, Tripp's Grill Among 2006 Energy Star Winners

Industry Report:
Sponsored by:
Hotelex Shanghai,
April 4-7, 2007
IAFP Holding Symposium On Salad Safety
IFMA Issues Call For Silver Plate Entries
'Napkin' Could Soon Detect Food Contaminants
Chemistry Professor Invents E. Coli Sensor Technology
Salmonella, E. Coli Test Strips Hit Market

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In This Section:
Technomic Details Threats But Predicts Decent 2007 For Operators
Blue Chip Holds 2007 Forecasts Steady But Hints Improvement
Final Second Quarter Public Company Numbers Show Decent Growth
And Just What Are The Chances Of Recession?

This issue's Regulatory ReportSponsor: Franke Foodservice Systems
Industry Report
Sponsor: Hotelex Shanghai, April 4-7, 2007
Economic Report Scotsman Ice Systems/Enodis

Technomic Details Threats But Predicts Decent 2007 For Operators
Yes, the general economy is expected to slow next year. Yes, tumbling gasoline prices could jump back up with any hiccup in the supply-demand equation. And, yes, we live in a dangerous world.

But the fortunate reality is American lifestyles depend on eating away from home. So, Technomic Inc. last month told those who attended the annual Foodservice Forecast & Outlook Seminars sponsored by the Int'l Foodservice Manufacturers Association that 2007 should be another year of positive real growth for foodservice operator sales.

Technomic forecasts total industry sales will grow 3.8% in '07, nominal, compared to 3.9% this year. With projected menu price increases of 2.8% both years, real growth is forecast at 1.0% in '07 versus 1.1% this year.

That 1.1% figure is revised downward from the Chicago-based research organization's original '06 forecast, the result of high gasoline prices and climbing interest rates cutting into traffic and comparable sales even more than originally anticipated. Casual dining was first to feel the pinch during the summer months, but since then, quick service, which at first benefited from consumers "trading down," has also seen growth decline and even go negative.

Even if lower energy costs hold, Technomic predicts, full service will continue to show lower growth than quick service as the slower overall economy restricts foodservice occasions and continues the trading-down trend. This pattern will affect lower income households the most, Technomic notes, perhaps giving an advantage to "value" concepts and products.

Most "Beyond Restaurants" segments, as Technomic labels them, should show positive real growth next year, the firm predicts.

The full '07 "Forecast & Outlook" report, which includes extensive segment, menu and forecast information, is available only to members of IFMA.

For information, call 312/540-4400 or e-mail

For information on other Technomic products and research, call
312/876-0004 or e-mail


Section sponsored by Scotsman Ice Systems/Enodis

Blue Chip Holds 2007 Forecasts Steady But Hints Improvement
The big econometric forecasters—nearly three score of them—polled monthly by Blue Chip Economic Indicators held their consensus forecast for 2007 U.S. gross domestic product steady in September at 2.7% real growth. They still see a number of factors slowing the general economy. But you can almost hear the gears spinning as they try to digest the recent large drops in energy prices.

These are difficult times for economic forecasters. Contemporary economies are very dependent on energy, as Western economies learned beginning in 1973. The third recent run-up in energy prices finally bit into consumer sales and ping-ponged into the inflation and wage outlook over the summer.

Now, just as most forecasters and users of economic data are finalizing forecasts and budgets, a sudden drop in the prices of gasoline, natural gas and other petroleum products throws a wrench into the machinery. Add in the volatility in the housing and auto segments and it's tough to get a read from the dice.

Still, from the foodservice equipment and supplies perspective, these trends are mostly neutral, though lower energy prices should help operator sales and traffic rebound. The forecasts for real growth in personal disposable income '06 and '07 have not appreciably changed. They're still running 0.3 to 0.5 points below what the economists thought in January of this year.

It will be interesting to see how the outlook will change if energy prices remain at lower levels, but not all of the slowdown is energy related. After all, this expansion cycle is more than four years old.

Section sponsored by Scotsman Ice Systems/Enodis

Final Second Quarter Public Company Numbers Show Decent Growth
Combined revenue of the 11 public equipment and supplies companies tracked by John Muldowney at Clarity Marketing, Tipp City, Ohio, grew 6.1% in the second quarter and 5.3% for the first half of 2006. These numbers are slightly less than those reported two issue ago, when results from two of the companies had not yet been released.

Eight equipment-oriented companies were up 8% for the second quarter and 5.6% for the half. As previously reported, the three public supply-oriented companies saw sales rise a blended 1% in the second quarter and 3.8% for the half.

All numbers do not deflate for price increases, of course. Blended list-price increases for the year ended March 30 were 4.5% according to AutoQuotes Inc. With deviated pricing structures for chains, buying groups and other large purchasers pulling list prices down, the real growth for large companies taken as whole is probably in the 2% to 4% range.

Section sponsored by Scotsman Ice Systems/Enodis

And Just What Are The Chances Of Recession?
Given the economy's volatility during the past year or so, there has been more talk of recession. So what do the big forecasters surveyed by Blue Chip Economic Indicator think the odds are?

One in four, according to the September survey. In a special question asked in both August and September, the economists dropped the odds of recession in 2007 to 25.1% in early September, down from the 26.9% they guessed in early August. Reasons for the slight decline: receding energy prices, the Federal Reserve's decision to hold interest rates (they have since held rates again) and declining bond yields.

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