Foodservice Equipment Reports

Towards Revising Our E&S Forecast

Our forecasting partner John Muldowney, v.p. marketing at Alto-Shaam, and I have been discussing our E&S forecast. You may recall in our November revisions, we revised our 2012 forecast of the E&S market at the manufacturers’ level down a point and 2013 down half a point. We currently have both years at 3.6% nominal growth, with 1.6% real for ’12 and 2% real for ’13.

We now have final numbers for the fourth quarter for the seven publicly reporting E&S companies and the Business Barometer from MAFSI. The results were better than we expected. Overall sales for the seven rose 3% in the period, thanks in part to good fourth quarters at Libbey and Carlisle Foodservice on the supplies side and improved results from several equipment-oriented companies.

That’s a marked improvement over a flat third quarter and a gain of less than 1% in the second. One qualification on the public company numbers: The softness is aggravated by declines in Europe and a softening of growth in Asia. In other words, the market is stronger in North America than the overall public company numbers show.

As the numbers from MAFSI confirm, the Barometer--based on reports from manufacturers’ reps in the U.S. and Canada and thus not including sales offshore— rose 4.3% in the third quarter and 3.8% in the fourth. Still, for our forecasts, we need to take the results in the rest of the world into account since the base NAFEM numbers include export sales.

But given the fourth-quarter numbers, John and I are inclined to increase the numbers for 2012 a tad. While we will run the number this week, we’re probably looking at 3.8% to 3.9% nominal for last year.

Yeah, yeah, so that’s old news. What about 2013? We’re going to take it down. The operator numbers have been surprisingly soft in the first quarter. A spike in gasoline prices has definitely cut into foodservice sales, aggravating, especially in lower income households, the loss of disposable income that resulted from the end of the payroll tax holiday Jan. 1. Consumers are still spending money, just not as much on foodservice. Retail sales in February were better than expected but eating and drinking place sales actually fell. The market has also been impacted by harsh winter weather in the Midwest and Northeast in February. Last winter was remarkably mild, so the comparisons are difficult. Given these headwinds, it’s not surprising many manufacturer and dealer friends tell us E&S sales have been soft so far this year.

So, as we said, we will lower our forecast for 2013. Again, we’re still playing with the numbers, but we’ll drop the forecasted number 0.3 to 0.5 point from the current 3.6% forecast.

But we’re still talking real growth of 1% to 1.5% this year. And the market will probably improve as the year wears on. What is keeping consumers spending on some goods and services is the improving employment picture. Also, the fallout from federal government gridlock on taxes and the budget has not been as dire as some feared. Many American consumers and businesses seem to be ignoring the nonsense and trying to move forward—which is always a good plan.

Cheers,

 

Robin Ashton

Publisher

rashton@fermag.com

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