2015 EQUIPMENT FORECAST: E&S Sales Growth To Peak In 2015

Perhaps the most surprising aspect of the market for foodservice equipment supplies in the U.S. and Canada during the past two years has been its ability to grow faster than its customers. While operator sales growth in the U.S. is estimated to have been 3.1% in current dollars in 2013 and 3.3% in 2014, according to estimates from Technomic Inc., Chicago, Foodservice Equipment Reports estimates the E&S market grew 4.5% in ’13 and 4.4% last year. We expect the pattern to continue into 2015, although the longer-term outlook is for the rate of growth to begin slowing after that.

We forecast the E&S market at the manufacturers’ level will grow 4.8% in current dollars this year and, after factoring out price increases, increase by 2.5% in real terms. This will be the third consecutive year of nominal dollar growth exceeding 4% and real growth above 2%. 

Several factors underlie this upbeat outlook, in spite of another forecast from Technomic of moderate growth for foodservice operator sales. Last May, Technomic forecast operator sales growth of 3.1% in current dollars and 1.2% in real terms for 2015. They have stuck by that forecast since.

Spec Markets Recover 

A key driver of E&S sales is the recovery, finally, of many of the foodservice noncommercial markets, such as schools, public healthcare, business and industry, corrections and others. Many of these segments are dependent on public funding for capital projects, and state and local budgets finally have recovered, thanks to several years of improving tax receipts. Noncommercial and other so-called “spec” markets, such as hotels, casinos, sports venues and the like, drive as much as 35% of all E&S sales.

MAFSI Business Barometer quotation- and consultant-activity numbers have been running at very strong levels for more than a year. In the 2015 MAFSI Market Forecast Report, released in November, 62% of surveyed reps expect more quotation activity this year and 53% forecast more consultant activity. Those anticipating fewer quotes and less consultant activity are in the single digits. 

In spite of flat traffic counts and slow sales growth, most restaurant operators continue to spend on equipment and supplies. The two capital expenditure indicators that are part of the National Restaurant Association’s Restaurant Performance Index—”Made Capital Purchase Past Three Months” and “Plan Capital Purchase Next Six Months”—have been running at or near pre-recession levels for nearly two years. 

Global Growth Also A Key Sales Driver

One other key factor is driving E&S growth overall, although not necessarily in the domestic U.S. market: the continuing globalization of foodservice, led by U.S.-based global restaurant and hotel brands and their key E&S suppliers.

The impact can be seen clearly in a comparison of numbers derived from the first three quarters of 2014 for equipment sales growth as tracked by the MAFSI Business Barometer and the five publicly reporting E&S companies we follow. With the brutal winter impacting the U.S. market, equipment sales, as reported by MAFSI reps, grew only 3.3% in the first quarter and 2.9% in the second before rebounding to 4.1% in the third quarter. The public equipment companies, on the other hand, saw sales gains of 9.5% in the first quarter this year, 8.4% in the second and 7.4% in the third. More chain-oriented, these companies have 20%-30% of their sales offshore. 

E&S Prices In 2015

Another factor that will push top-line growth this year is higher prices for many E&S products. Prices for nickel and chrome, the two key metals beside iron in stainless, escalated more than 25% during ’14. Aluminum prices also are significantly higher than a year ago. While the rising U.S. dollar and a slowdown in economic growth in China and Europe undercut prices during the second half of last year, prices for these key commodities remain elevated. This is causing most E&S manufacturers to push for higher prices after an extended period of very modest increases the past three years.

To purchase FER‘s complete 2015 E&S Forecast, call 800/986-9616 or email Christine Palmer at cpalmer@fermag.com.          “””