Foodservice Equipment Reports Fortnightly
www.fermag.com

Welcome to FER Fortnightly Online Newsletter
November 20, 2007








Regulatory Report:
Sponsored by:
Enodis
BAAQMD Hearings On Charbroilers Are Baaack!
Drought Triggers Water Restrictions Around United States
South Carolina Mulls New Sprinkler Requirements
Rhode Island, NSF Partner On Inspection Plan

Industry Report:
Sponsored by:
Server Products
Rankin-Delux Acquired
Collapsible Chafer Honored At Editors' Choice Awards
Wendy's Improves Results, Puts Off Sale
Bottled Water Backlash May Bend Buying Habits



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In This Section:
Public E&S Companies Report Strong 3Q
MAFSI Barometer Shows Higher But Moderate Growth
Equity Markets, Oil Prices, Other Economic Boogeymen
Revised FER 2008 E&S Market Forecast Available

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

Public E&S Companies Report Strong 3Q
The sheep and goats on Wall Street may be bleating the blues, but nearly all public foodservice equipment and supplies companies have posted strong revenue and earnings growth for the third quarter of 2007. Eight companies tracked by our forecasting partner John Muldowney, president of Clarity Marketing in Tipp City, Ohio, saw revenues rise a blended 21% in the quarter over third-quarter '07. "This looked like a very healthy quarter," Muldowney said.

While this growth includes acquisitions and very strong growth rates for two equipment companies, organic growth for all but one of the reporting companies exceeded 5% in the quarter.

Six equipment-oriented companies posted combined and blended growth of 28.6% in the quarter over the same period last year. Revenues for the first nine months of '07 rose a whopping 19.8%. Even figuring out acquisitions, growth in the quarter was 19.9% for the equipment companies.

The two supplies companies tracked saw combined sales rise a healthy 6.9% in the quarter and 5.7% for the year-to-date.

Two of the tracked equipment companies, both cooking equipment manufacturers, have posted remarkable numbers this year. One reported sales up 142.5% for the quarter and 121% for the first nine months. The other reported sales gains of 63% for the quarter and 44.8% for year-to-date.

But even scrubbing out the numbers from these companies and acquisitions, organic growth of the remaining six companies rose 7.6% during the quarter.

What is clear now is that any slowdown in operator sales has yet to affect the major public E&S companies. Many of these companies are also tied to the big Quick Service Restaurant chains that have been growing rapidly overseas in addition to seeing same-store sales gains in the U.S. market. What is also interesting is the disparity between the publics and the broader market, as tracked by the Marketing Agents Association for the Foodservice Industry's Business Barometer (see article below).

 

Section sponsored by Manitowoc Foodservice Group

MAFSI Barometer Shows Higher But Moderate Growth
In contrast to the numbers posted by the large public equipment and supplies companies, manufacturers' reps surveyed by the Manufacturers’ Agents Association for the Foodservice Industry continued to show very modest sales growth for third-quarter 2007. While the numbers were a bit better than those of the first two quarters, they reflect a market that appears to be flat or even negative in unit growth terms after price increases are factored out. This disparity between the performance of the publics and the reps is quite remarkable and unusual.

Overall sales rose only 2.9% during the third quarter, compared to year-earlier levels, according to just-released results from the MAFSI Business Barometer survey. This is only slightly better than the 2.8% reported for the second quarter and 2.3% for the first quarter. The survey asks reps to report sales increases on like-for-like lines versus the previous year's quarter.

Sales did improve slightly, especially in the Northeast and West, where equipment sales specifically were negative and flat, respectively, during the second quarter. Equipment sales jumped 3.4% in the third quarter in the Northeast, and improved slightly by 1.9% in the West. The South continued to outpace the other U.S. regions. In Canada, growth remained a more robust 5.5%.

But sales growth of supplies and tabletop, which did slightly better than equipment in the second quarter, deteriorated in the third quarter. Equipment sales rose a combined 3.1% while supplies grew just 2% and tabletop rose 2.3%. Furnishing sales grew 2.9%.


Section sponsored by Manitowoc Foodservice Group

Equity Markets, Oil Prices, Other Economic Boogeymen
From the perspective of local reps and dealers we spoke recently with at the New York Int'l. Hotel/Motel & Restaurant Show, the sky does appear to be falling. The markets take one hit after another. Oil soars near $100 a barrel. The reps and dealers know how much of their local economy is based on the health of the financial sector. And that sector looks headed for the ICU.

But does the sub-prime meltdown, falling stock markets, a housing market with plenty of negative energy and runaway oil prices affect Main Street as it does Wall Street? Will it cut into consumer spending for foodservice?

It's too early to tell. Retail sales generally were soft in October, but the big-box retailers think some of the weakness was the abnormally warm fall cutting into winter clothing sales. Foodservice fared better. With the exception of lower-end casual dining, which has been in a slump for more than year, same-store sales numbers from many quick service restaurants and higher-end casual chains remain positive.

A Wall Street Journal survey last week, meanwhile, revealed that four of five economists do believe problems in the credit markets will have an impact on consumer spending. They also reported a one-in-three chance of a recession, a number similar to that reported by Blue Chip Economic Indicators.

Among factors to watch, keep on eye on gasoline and heating prices that ensue from the oil price run-up. And keep tabs on consumer sentiment. These number and chain same-store sales numbers will be the first indicators of things going south.


Section sponsored by Manitowoc Foodservice Group

Revised FER 2008 E&S Market Forecast Available
In case you missed it in FER Fortnightly two weeks ago, our sister publication, Foodservice Equipment Reports, has revised its forecast of equipment and supplies manufacturers' sales in 2008 downward only slightly from its preliminary forecast released Aug.1. The new forecast is for current-dollar growth of 5.9% and real growth, factoring out estimated price increases, of 1.5%.

The complete revised 2008 Equipment & Supplies Market Forecast is available from FER for $249. The forecast includes detailed data and analysis on the general economy, the operator market, materials pricing, historical E&S pricing data from AutoQuotes, and of course detailed forecasts of growth and price changes for nine categories of equipment and supplies. To order the forecast or for more information, contact Jessica Scurlock at jscurlock@fermag.com or call 800/986-9616.




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