Foodservice Equipment Reports

Starting The Gaze Into My Crystal Ball

Now that the FER Top Dealers Report is finished, the NRA Show has come and gone and we’ve attended the annual Association for Healthcare Foodservice meeting, it’s time for me and my forecasting partner John Muldowney, a marketing executive at The Boelter Cos., to begin work on our annual foodservice equipment and supplies market forecast. 

We present all of the details of our weeks of work at our annual President’s Preview E&S Market Forecast meeting. It’s scheduled this year for July 29 at the Westin O’Hare in Rosemont, Ill. (There’s still plenty of time to register for the meeting. All of the details are at bit.ly/U3ERq4.) John, who has been my forecasting partner since 2000 and my friend for more than two decades, balances my tendency toward extreme optimism. He can be grumpy at times.

But honestly, looking at all of the forces and factors that drive foodservice activity and operator spending on capital goods, I can say without question that the outlook over the next year and a half looks better than it has at any time since the Great Recession handed foodservice its worst downturn in our lifetimes.

We’re not going to bore you with all of the details here. You have to come to the meeting or buy the forecast package after the meeting. But let me touch on a few points.

• All of the macroeconomic factors that drive foodservice spending—employment growth, disposable income growth, consumer spending trends, consumer confidence, inflation trends and gasoline prices—are more positive than they’ve been in years and forecast to remain so.

• Restaurant same-store sales and traffic have rebounded sharply from the dreadful winter. Operator expectations are close to pre-recession highs. Business travel spending remains robust. The vacation travel outlook is better this summer than in years. All of this should increase restaurant spending. The capital spending indicators that are part of the National Restaurant Association’s Restaurant Performance Index are now running at pre-recession levels with six out of 10 operators planning E&S purchases.

• Growth of state and local tax receipts is slowing, but only because of the bubble of front-loading that the “fiscal cliff” drama created in early 2013. The truth is, most state and local governments have weathered the drop in tax receipts, and their budgets are in much better shape. Now that they have some access to capital funds again, publicly funded noncommercial operators are getting back into buying mode and have huge pent-up demand. 

• Despite the terrible winter weather, the publicly reporting equipment companies posted combined first quarter 2014 sales increases of 9.5%! The MAFSI Barometer managed a gain of 3.3% in the first quarter, better than expected.

There are a couple worrisome clouds on the horizon. Both food prices and stainless (read nickel) prices have spiked in the first half of the year. But both operators and manufacturers seem to be dealing with them for now. And they affect margins, not necessarily sales, in the short term.

We currently forecast 2014 growth of E&S at the manufacturer level at 4.1% in current dollars and 2.1% in real terms. We didn’t change that, given the awful winter, when we revised our estimate of 2013 E&S sales up sharply in March after the fourth quarter numbers came in. The 2013 estimate ended at 4.5% nominal and 2.4% real. But I am beginning to wonder if we’ve undershot 2014 a bit. John and I will chew that over in the coming weeks.

As for 2015? I think it will be the best year for E&S in the past five years. Come to the forecast meeting for hard numbers.

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