Foodservice Equipment Reports

We’re Still Upbeat About E&S Market In 2015

It doesn’t happen very often, but our forecasting partner John Muldowney, Principal at Clarity Marketing, and I actually had a minor disagreement about how fast the foodservice equipment and supplies market has been growing. But after much debate, we are now sticking with our current estimates and forecasts for 2014 and 2015. Last July, at our annual President’s Preview E&S Market Forecast, we set—at the manufacturers’ level—2014 market growth at 4.4% nominal and 2.3% real and forecast 4.8% nominal and 2.5% real growth for 2015. 

Two factors led me to consider revising these numbers downward. First, E&S sales growth slowed unexpectedly in the fourth quarter 2014 vs. the prior year. The nine public companies we follow only managed 2.7% combined sales growth in the quarter. The MAFSI Business Barometer, which tracks reports of sales changes by manufacturers’ representatives, rose only 2.9% fourth quarter. This slowdown caught us a bit by surprise because, thanks to surging employment and plunging gasoline prices, the operators finally were seeing some genuine good news on traffic and sales.

Then, after a relatively mild beginning of winter in the U.S., big snowstorms, especially in the Northeast, began to undercut the general economy and foodservice sales. 

So, I thought we might have to reconsider. But now that we have the MAFSI Business Barometer and the public company numbers for the first quarter 2015, we’ve decided our 4.8% for this year still looks good. And while I argued to decrease our estimate of 2014 sales growth a bit, John convinced me 4.4% is still a solid estimate. He pointed out the nine publics saw combined revenue growth of 5% for all of 2014, with the six equipment companies up 6%. The big E&S dealers represented by FER’s Top Dealers (see our annual report in this issue) also reported strong 10.6% growth in 2014. Play these numbers off of the MAFSI Barometer’s 3.3% average for the year and, as John said, it comes out closer to 4.5% than 4%. So we’ll keep 2014 at 4.4%.

E&S sales bounced back in the first quarter this year. The MAFSI Barometer was up a strong 4.7% for the quarter, and the reps report very promising quotation and consultant activity. Their forecast for the second quarter is 4.6% growth. It’s true the combined public-company numbers rose only 1.1% first quarter, but three of the nine companies had very tough quarters and the other six companies posted robust gains. 

One other positive indicator: According to Technomic Inc., the operators are growing faster this year than it expected back in January. The research firm revised its 2015 forecast higher in a revision released to its customers May 18.

So right now, we’ll continue to forecast 4.8% growth this year. As we’ve said before, we believe this year will be the peak of the current E&S market cycle. To find out what our forecasts will be for 2016 and beyond, you’ll need to sign up for our President’s Preview E&S Market Forecast meeting, scheduled for July 28 at the Westin O’Hare in Rosemont, Ill. Information about the meeting as well as the registration form can be found at bit.ly/1Bc33W7.

Related Articles

SPECIAL REPORT: Headwinds Slow E&S Sales Growth

Walking Among Giants

The Power Of Association