Foodservice Equipment Reports

Reconsidering Our E&S Forecast

Many of you have been asking if we’re sticking with our July forecasts for the equipment and supplies market for 2012 and 2013, released during our annual President’s Preview E&S Market Forecast meeting. We then predicted 4.7% current dollar growth and 2.6% real growth for this year, numbers pretty close to 2011. Our forecast for 2013 anticipated some slowing and harder comparisons. We put nominal growth at 4.3% and real growth at 2.5%.

To not mince words, we’ll probably revise downward. Our forecasting partner John Muldowney and I haven’t settled on anything, but we have agreed we’ll most likely be moving lower. We’re not committing until we see the third quarter numbers from the public companies and the MAFSI Barometer, but it does look like the market for equipment and supplies purchases has slowed.

The second quarter numbers that came out right after we did the forecast in July were disappointing, but complicated. The seven public companies we follow saw blended sales increase less than 1%, the worst quarter since the market went positive in the second quarter ’10. But nearly all the negative pressure came from Europe and because the big conglomerates are more exposed to international trends, we’re still not sure this reflects the North American market very well.

The MAFSI Barometer, fielded quarterly by the Manufacturers’ Agents Association for the Foodservice Industry, also slowed in the second quarter to 3.6% growth. But the reps were a bit more optimistic for quarter three.

Three key factors are dragging on foodservice operators’ E&S cap ex sales. Two are general business issues: uncertainty about the election and the “fiscal cliff” and uncertainty about the cost impacts (and future) of the healthcare law. But the really big problem is the certainty that food costs for proteins will spike by as much as 15% over the next year and stay elevated for two or three years. When it doesn’t rain, bad things happen to food prices.

On the other hand, operators still are doing reasonably well. Consumers seem to have frugality fatigue, and even the unexpected gasoline price run-ups of August seem not to have affected same-store sales growth for many operators very much. We had a nice email exchange with our friends at Technomic last week. They are sticking with their reasonably optimistic forecasts of operator sales growth this year and next. As Technomic V.P. Joe Pawlak wrote to us, “Growth is growth.”

We’ll report back after we see the third quarter numbers.



Robin Ashton


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