Foodservice Equipment Reports

Gasoline Price Hikes Threaten Foodservice Recovery

Just as consumers are starting to return to foodservice, a steep run-up in energy prices, including for gasoline, threatens to undercut the momentum. Oil prices surpassed $100 a barrel late last week, before falling back on news that the Saudis would raise output. But concerns about the stability of oil-producing regimes in the Middle East, along with increasing demand as the world economy improves, continue to pressure prices. The run-up in oil costs has, in turn, driven gasoline prices higher. What had already been a worrisome trend has been aggravated by the events and uncertainty of the past weeks.

Average national gasoline prices jumped 20 cents a gallon last week, to an average $3.63 a gallon, according to data released yesterday by zfacts.com.  Prices had already been rising since last fall, an unusual pattern, as prices usually peak in the summer. Prices are now 74 cents higher than a year ago.

The increases are concerning foodservice market observers. “Gasoline prices typically do impact restaurant traffic and sales, especially along highways and in non-urban areas,” Hudson Riehle, senior v.p. of the National Restaurant Association’s Research & Knowledge Group, told FER Fortnightly. He said the association expected rising gas prices when it did its recently released 2011 forecast, but that “we continue to monitor the situation closely.”

Joe Pawlak, v.p. at Technomic Inc. said that when the foodservice market experienced the last extreme run-up in gas prices in ’08, $4 a gallon was the “magic number.” After that, traffic and sales began to decline. He added that in the current situation, there is the danger of a double whammy. “If gas prices continue to rise to record levels, not only will they drive down foodservice sales, but would be a second hit to the overall economy, which would further negatively impact foodservice.”

We can only hope the situation settles down in the Middle East.