Foodservice Equipment Reports

Fuel Price Plunge; What Does It Mean For Foodservice Worldwide?

With futures prices for Brent and West Texas Intermediate crude oil well below $50 a barrel on Jan. 27, and U.S. prices for regular gasoline/petrol approaching $2.00 a gallon, the plunge in petroleum prices has become a major factor in the outlook for foodservice growth in most of the world.

The impact has already been clearly seen in the U.S. market, where restaurant same-store sales and customer traffic trends have spiked since September, when the rapid decline in oil and gas prices began to boost consumer activity generally. While not the only factor in an improving outlook for growth in foodservice sales in 2015—strong jobs growth may be an even more significant factor—sustained low prices for automobile fuels has the same impact as a tax cut, particularly for lower-income households.

But what about the rest of the world’s foodservice markets? Generally, one can separate markets by whether they are net consumers of energy or net producers/exporters. The U.S., Europe, South America (other than Venezuela, Colombia and Ecuador), and most of Asia/Pacific including the large and/or fast-growing markets in Japan, China, Indonesia, India and Australia are likely to see increased consumer spending, including on foodservice, if prices indeed stay relatively low, as most forecasters are predicting for the short-term.

Countries that count on oil exports for significant portions of their total gross domestic output, on the other hand, will suffer, with foodservice growth also likely to slow or reverse. Russia, all the countries around the Persian Gulf, including Saudi Arabia, the U.A. E. and Iran, Nigeria, Angola and Algeria in Africa, and even Mexico and Canada in North America will see slower foodservice growth with lower petroleum prices. Some of these countries, including Russia and the Gulf states have been among the fastest-growing foodservice markets in the world, according to research by The NPD Group, CHD and others.

Still, the foodservice growth impacts of lower oil and gasoline/petrol prices vary from country to country. In the U.S., where gas taxes are relatively low, the price plunge has had a substantially larger impact on household income than in most countries in Europe, where taxes are relatively high. Peter Backman, principal of the foodservice research firm Horizons in the U.K., told FER Worldwide Report that the decline in petrol prices there has been a more modest 30%, compared to more than 60% in the U.S. “There’s no evidence here yet that consumers are eating out more because of the lower petrol prices,” he said. “But I guess the effects might be hidden by the good like-for-like we’ve been seeing here in the U.K. in 2014 and so far this year. One factor for us is much better weather than last year.”

Still, for much of the developed world, lower gasoline/petrol prices are likely to have a significant positive effect on foodservice spending during the coming year.

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