Will E&S Market Growth Improve?

One of the reasons I like going to the NRA Show, other than it’s a show at which I get to sleep in my own bed, is it gives me a chance to talk to a lot of folks at all levels of the industry. This is especially important as it’s about this time of year that I start thinking about where things are going for our annual forecast. (Our annual President’s Preview E&S Market Forecast is scheduled for Aug. 8 at the Westin O’Hare in Rosemont, Ill., by the way.)

Generally, the mood and attitude of everyone, from operators to dealers, consultants and manufacturers, was good. Nearly everyone had a slow, but not disastrous, first quarter. The numbers to date show this.  Our friends at Technomic shared their preliminary chain same-store sales data with us and with 46 chains reporting, half were down and half were up. If you include McDonald’s, which had its toughest quarter in years, the weighted results are negative; if you take them out, which is what we normally do since Mickie D’s is so large it skews the results, the numbers are slightly positive.

As we reported last week, the seven publicly reporting companies we follow had a slow or even negative first quarter. The overall combined revenues of the seven were up only 1.8%, but that masks that four of the seven reported declines. Both supplies-oriented companies were down, which is a current market bellwether as supplies sales generally more closely follow operator fortunes.

MAFSI is about to release its first-quarter Barometer. Michael Posternak of Posternak Bauer Associates, the New York-based manufacturers’ rep who oversees the Barometer, told me the overall numbers show growth between 2% and 3%. The trend was consistent across all five of the regions, including Canada, that MAFSI tracks.

That’s the recent history. You may recall in late March we lowered our forecast of E&S market growth for 2013 to 3.8% in current dollars. That’s because we’d been hearing all of what the numbers now show.

We’re sticking with this forecast for now, but frankly we may have overshot downwards. I have a sense the rest of the year will be better, for your operator customers and for the E&S market.

The first reads on operator performance from research groups such as Black Box Intelligence and Miller Pulse were more positive for March and April, according to reports in Nation’s Restaurant News. The National Restaurant Association’s Restaurant Performance Index returned to expansion territory in the March survey. And some of the publicly funded noncommercial markets, which have still to return to capital spending mode generally, are starting to move a bit, according to reports from manufacturers and dealers. State and local tax receipt growth is sluggish, but positive. I suspect we’ll see a slightly better E&S spending by schools this summer.

And perhaps most importantly, employment and jobs trends are very gradually improving, house prices are finally beginning to recover, and the equity markets are booming. This is buoying consumer confidence and helping to boost foodservice spending. As NRA, Technomic and others have reported for some time, there is still a lot of pent-up demand for eating out. And on our side of the business, there is still much pent-up demand to renovate and replace facilities and equipment.

All in all, I believe the rest of the year will see stronger E&S market growth.



Robin Ashton


rashton@fermag.com “””

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