Foodservice Equipment Reports
Publisher's Viewpoint

FER Forecast’s Top Takeaways

So we did change our minds just a little bit and lowered the FER 2017 E&S market forecast to 4.1% nominal growth from last year’s ’17 forecast of 4.3%. And we also took our real change down to 1.8% from our original 2.1%. That’s because new AutoQuotes data showed my forecasting partner John Muldowney of Clarity Marketing and me that manufacturers have raised average list prices during the past year quite a bit more than we anticipated, nearly 4%. And that was before metals prices, especially carbon steels, began to spike in late spring this year. It’s the largest average list price increase since ’07-’08, to put it in perspective.

That’s one takeaway for operators from our annual forecast, which we presented Aug. 9 at the FER President’s Preview E&S Market Forecast meeting in Rosemont, Ill.: Expect your manufacturer and dealer suppliers to be more aggressive on price increases during the next year.

Carbon steel prices have jumped as much as 40% since the beginning of this year, according to Lisa Reisman, Executive Editor of MetalMiner, who presented the materials price-trends part of the forecast again this year. The reasons: Car companies are doing quite well using a lot of steel but the main driver is the U.S. steel makers won a big anti-dumping trade case against Chinese imports. Now nickel has moved higher too for reasons of its own having to do with mines in the Philippines; this puts pressure on stainless. Aluminum prices are moving higher too. Plastic resin prices are also trending up, Reisman says. When this many core materials used in foodservice E&S increase substantially in price, it puts pressure on the suppliers to raise prices. Just know it’s coming.

Perhaps the biggest takeaway for operators from the forecast is that, for most of you, as we said last month, ’17 should be another decent year. Yes, major chain same-store sales and traffic have been trending lower since February. This led a well-known restaurant stock analyst, Paul Westra of Stifel in Chicago, to declare a “restaurant recession” last month. And the chain sales and traffic trends were one factor in our decision to lower next year’s E&S forecast slightly. Chain trends are typically the leading indicator for the foodservice operator market. But while they dominate the restaurant market, the big chains are not the entire foodservice market. Other observers, including us, think part of the chain slowdown may be self-inflicted. There has been a lot of aggressive unit building the past few years and, given this is a very mature, saturated restaurant market, we may simply have too many seats chasing too few fannies, as they say.

Our Technomic friends say independent restaurants are doing well, as are nearly all the other 22 segments, including the major institutional segments. And as I mentioned last month the general economy continues to benefit foodservice with continuing strong jobs growth and even lower gasoline prices than last year.

So be careful out there, but don’t believe reports the sky is falling. Unless something really dramatic happens, it isn’t in the foreseeable future. Party on, my friends.

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