Technomic Takes 2015 Operator Sales Forecast Higher

The improving jobs market and falling gasoline prices are among the factors underlying an upward revision of Technomic Inc.’s 2015 forecast of foodservice operator sales, released to the firm’s customers last week. Technomic now forecasts total foodservice industry sales will grow 3.9% in current dollars with real growth pegged at 1.5%. This compares with the Chicago-based foodservice research firm’s preliminary 2015 forecast, released last May, which set nominal operator sales growth at 3.1% with real growth of 1.2%. Menu-price inflation is forecast at 2.5% this year. In the original forecast, it was 2%.

“Improving employment is the key driver behind better prospects for the industry and our main reason for increasing our forecasts,” Joe Pawlak, Technomic v.p., told FER Fortnightly.

Technomic also revised its estimate of nominal and real growth for 2014. The firm pulled back its nominal growth estimate for last year to 3.1% from 3.3% in May’s forecast, but mostly because of slower than anticipated menu price inflation; that estimate was cut for 2014 to 2.5% from 3.5%. The real growth estimate for ’14 improved to 0.7% from the earlier 0.1%, thanks in part to better than anticipated operator sales in the third and fourth quarters.

Interestingly, while the dramatic drop in gasoline prices is a factor in the improved consumer prospects that led to the forecast of stronger growth, Pawlak explained it’s not as big a driver as one might expect. “We have found that although (the gas price decline) has put more money in consumers’ pockets, they are using most of this new-found cash to pay bills, credit cards, and other essentials, not on discretionaries like foodservice,” he said.

In looking at the new segment forecasts, the most dramatic change is for the two largest: limited- and full-service restaurants. Combined sales of the two segments account for two-thirds of total industry sales. Sales at limited-service concepts have grown faster than full-service since well before the Great Recession, as expanded menu offerings, consumers “trading down” and the surge of fast-casual concepts—included in the limited-service category—drove relatively higher growth rates.

In the original 2015 forecast last May, Technomic predicted this trend would begin to change in 2015, as the general economy improved. Growth rates for both segments were expected to be even at3% nominal, 1% real. But in the revised forecast, full-service is expected to grow a full point faster than limited-service, with a prediction of 4.5% current dollar and 2% real growth for full-service. It’s a startling change.

For information on Technomic forecasts and other research products, go to technomic.com. “””