Foodservice Equipment Reports

Why E&S Market Growth Is Accelerating

When our forecasting partner John Muldowney and I talked over this year’s equipment and supplies market forecast, we could really only come up with one or two negative trends. Forecasts for all of the macroeconomic indicators that impact foodservice—employment trends, disposable income, personal consumption spending, consumer confidence, food and energy prices—look to improve for the rest of the year and into 2015. Economic growth is forecast to pick up in most of the world’s developed and developing economies next year.

Technomic, the only one of the research groups to float a 2015 forecast to date, expects operator sales growth to improve moderately, in part because of the better macroeconomic outlook and in part because of likely favorable comparisons with this year’s tough winter. U.S. operators are challenged primarily by sluggish traffic. Per capita annual visits keep slowly falling primarily among the 18-34 contingent, the so-called Millennials. But they continue to love to eat away from home.

The only obvious short-term threat—one can never forecast the really big things like lousy weather or an international event that makes energy prices soar—is the run-up in food prices this year. Expected last year, following the devastating 2012 drought, prices have increased by double digits, particularly for proteins. The continuing drought in the Southwest, including key California agricultural areas, isn’t helping. The higher food costs squeeze margins and thus capital formation for operators. And it’s that capital spending we care about. Still, commercial operators’ plans to buy E&S remain at post-recession highs that match levels seen before the recession.

A key factor in next year’s growth is the recovery of the spec markets. Most state and local budgets have recovered, and there’s a ton of pent-up demand at schools, healthcare and correctional facilities. Business and industry foodservice is being pushed by increasing employee counts. Lodging is doing well, thanks to robust business travel. Troops are returning stateside, pushing customer counts and the renovation of military foodservice facilities.

Because the spec markets make up as much as 40% of E&S sales in normal times, this is good news for the overall market. Meanwhile, chain and independent restaurateurs continue to spend for renovation and replacement as well as new equipment for menu changes.

John cited two trends that are pushing sales of cooking and serving equipment. Many operators, including quick-service and noncommercial folks, are upgrading to combis and fast-ovens. These are not inexpensive pieces of equipment. We’ve heard many rumors of even the largest QSRs looking at combis. And the multifunction fast-ovens continue to spread throughout foodservice.

On the serving side, the expansion of multifunction blended drink machines and higher-end coffee and tea equipment continues apace.

So, the view on the near horizon is mostly positive, hence our forecast for strong growth in 2015.

Cheers,



Robin Ashton

Publisher 

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