Foodservice Equipment Reports

There’s Light On The Bumpy Road

Forgive my mixing metaphors, but this January issue presents our annual forecast. And while our Founding Editor Brian Ward and I were writing the operator and E&S market outlooks in November, we had no idea how, when or if Congress and the administration are going to resolve the budget, tax and fiscal impasse dubbed the fiscal cliff. It’s hard to make predictions with so much uncertainty. We’re now a couple weeks into December and while there’s hope, there’s still no certainty about a resolution or much idea what it would look like. And for all I know, it could all be resolved by the time you read this. We do know, however, that the uncertainty—among other factors—has already slowed the E&S market.

We now have seen all the third quarter equipment and supplies market data, as well as the October Restaurant Performance Index (RPI) from the National Restaurant Association. It all adds up to a mixed outlook for the E&S market during the next few months. But we still think the fundamentals will lead to reasonable growth for the market in the coming year. And that’s especially true if the feds do resolve the impasse in a way that cheers up businesses and consumers.

One clear trend, from NRA’s RPI, is that restaurant operators are worried about the next six months. A lot of it is probably the constant news barrage about the fiscal impasse, but operators also know they are going to get slammed with higher costs for proteins, thanks to the ongoing drought.

The manufacturers’ reps seem to have picked up this worrisome mood. In the third-quarter MAFSI Business Barometer, they reported a big drop in quoting activity and forecast slowing sales gains in the fourth quarter.

In response to all this, we cut our estimates for growth in 2012 by a point—both nominal and real—and pared back the forecast for ’13 about a half point. But we’re still looking at current dollar growth rates in the 3.6% range and real growth of 1.5% to 2%, which isn’t too bad at all.

The next few months will almost certainly see some slowing in market activity, thanks to all the uncertainties. But we remain reasonably optimistic for several reasons. The general economy and the employment situation continue to gradually improve. Consumer confidence has been running well ahead of the past four years. NRA’s research continues to show lots of pent-up demand for foodservice from frugality weary consumers. And the day I write this, NRA released its forecast for ’13. Analysts there predict reasonable growth in operator sales. The Technomic forecast also is positive.

And there is still plenty of pent-up demand for E&S, as operators continue to renovate and replace. The one good number in the NRA’s recent RPI report: 50% of those surveyed said they planned a capital purchase in the next six months, up from 44% in September.

So call your customers, sympathize with their margin pressures, and invite them to join you at The NAFEM Show next month. As they say, “Make it happen.”

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