Growth In A Mature Market; More Industry Losses

Since we presented our annual President’s Preview E&S Market Forecast on July 28, we’ve seen more evidence that operators are doing better than they have since the beginning of the Great Recession. But we’ve also seen data that continues to suggest just how mature and competitive the foodservice market is in the U.S.

We noted last month that Technomic Inc. revised upward its operator forecasts for 2015 in May; the research firm took up total industry nominal growth more than a full point—fueled in part by menu price increases—to 5.2% and predicted another good year in 2016 with nominal growth of 4.9% and real growth of 2.5%. In late July, The NPD Group reported commercial foodservice visit numbers for the year ending May 2015. At 61.1 billion visits during that 12-month period, traffic finally exceeded that of the year ending May 2010, according to NPD’s CREST data, which relies on consumer reporting. Higher average checks also helped boost total spending 3%. 

But the CREST data—and trends from NPD’s spring ReCount restaurant census—also make it clear that the stronger growth is hardly universal. Total restaurant and foodservice visits were flat for the year ended May. Quick-service hamburger chains and midscale and family dining restaurants, including those in hotels, saw traffic fall 3% during the 12-month period. Independent restaurant traffic fell 2%. And the ReCount numbers show a 1% decline in total net restaurants to 630,511 as of March 31, 2015, vs. the date the year prior. All of that loss was through independents; their totals fell almost 11,000 restaurants to 340,135. Chain units increased by 1%.

The point is this is a very mature foodservice market. We’ve joked that foodservice in the U.S. today is like it was in Europe (until the chains started expanding there): “You build a restaurant or a hospital and operate it for 400 years.” And mature markets are extremely competitive, as any operator in foodservice can attest. So the game becomes honing and keeping one’s edge. 

Technology and capital spending, including kitchen equipment and keeping dining areas fresh and inviting, can help, as we all know. It’s one of the reasons the E&S side of the market has been growing faster since the end of the recession than the base operator market. 

In Memoriam

On a sadder note, David Wightman, founder of XDX, passed away suddenly while traveling in Italy in late July on his way to see an Italian refrigeration manufacturer. David was one of the great “mad scientist” inventors and engineers in this market during the past two decades. He held a dozen or so patents on valves and other technologies that increased the efficiencies of refrigeration. He was only 53, and his passing is a loss to all of us.

And with the unfortunate number of deaths of industry figures during the past few months, we didn’t have a chance to note the passing of our friend Don Camacho Jr., a rep whose territory included Chicago. Don inherited Camacho & Associates from his father, Don Sr., a past president of MAFSI. But he was a great rep in his own right. He also passed away unexpectedly on the farm he maintained for his Arabian horses. Our thoughts are with both families.