Foodservice Equipment Reports

The E&S Market Is Devilishly Complex

I’ve spent a great deal of time the past few weeks trying to explain the market for foodservice equipment and supplies to private equity and research companies. Some big deal must be brewing or maybe there are several deals in the works because the focus of their probing is different. Such companies come to us for our forecasts and knowledge of the market. We sell them our forecast package and then answer any follow-up questions. They have a lot of questions.

Some of the questions are easier to answer than others. For example, I usually can boil down the economic factors that drive the foodservice and E&S markets to a few bullet points. I have plenty of evidence that shows how the foodservice market in the U.S. is mature and how that has prompted a shift from new unit and facilities construction being the main driver of E&S sales. Now the majority of sales are for renovations, replacements and menu rollouts. I talk about the increasing importance of service and repair. I detail the rapid growth of foodservice in developing markets around the world and how global U.S. operators and their suppliers are benefitting. 

But the conversations get much less simple when I try to explain how E&S gets specified and purchased. Those of us who have been around a while know there is not one foodservice market; there are 20 different segments. How McDonald’s or Subway operators buy capital goods is totally different from the way a hot-dog stand or Morton’s The Steakhouse buy equipment, which, in turn, is different from how foodservice at the Cleveland Clinic, the University of Iowa or the U.S. Army spec and equip their facilities.

I can try to outline the “normal” paths of E&S specification and purchasing: manufacturer to independent multiline manufacturers’ rep to dealer or distributor to operator. 

But then it gets complicated. What exactly is a dealer or a distributor? As we know, there are many differently niched entities in the channel: full-service dealers; bid houses; kitchen equipment suppliers (what we used to call dealer-fabricators); cash-and-carry concepts; healthcare- and corrections-oriented distributors; Internet-oriented dealers; two-tier distributors that handle ice, soft-serve and beverage-dispensing equipment; broadliners; and warehouse clubs. Of course, then one needs explain dealer buying groups.

Then one also has to explain the role foodservice design and management advisory consultants play in the specification process; how the big chains rely on purchasing co-ops; and how many operators, especially in healthcare, are members of group-purchasing organizations that are a major influence on what brands are selected. And not least, how the manufacturers’ reps try to influence the brand-selection process through all of these pathways. 

At the end of the conversation, everyone usually gets a bit exasperated. “Why can’t it be simpler?” they are wont to ask. And all I can say is, it’s a very big, complicated, dynamic market with many different needs and room for just about anyone who has an idea of how it works.

By the way, we released our new forecasts at our President’s Preview E&S Market Forecast meeting July 29. If you would like to purchase the package, all eight PowerPoint decks and the forecast spreadsheets, e-mail me at rashton@fermag.com.

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