Foodservice operators will need to be prepared to adapt to change quickly over the next five years. This special two-part series, prepared for Manitowoc Foodservice by Technomic, Inc. discusses the economic, political and energy related factors that will effect foodservice operations and how operators can prepare for the future.
Despite the fact that the economic picture continues to slowly improve, enabling more consumers to use foodservice more often, their expectations of value have become ingrained. At the same time, labor and energy costs are expected to rise. Operators will continue to work with small profit margins, looking for ways to both save costs and drive sales.
Foodservice forecasts were developed using key economic forecast data, historical data on the industry and Technomic's time series through a collaborative effort among Technomic's senior management team. Some economic and demographic assumptions were made, including an expected increase in both GDP and DPI, with income disparity increasing as well. Lower-income households spend far less on foodservice. Solid job growth is expected, leading to less pressure on the Fed to keep interest rates low. Home prices, mortgage applications and new home construction are all increasing. Finally, energy costs continue to rise, but indications are that increases will be moderate and consistent, rather than volatile.
Technomic's long-term forecast shows foodservice growing at a real (or inflation adjusted) rate of 1.8% annually from 2014 through 2019. This compares very favorably to the 1.0% annual decline during the past five years. That means that over the next five years, the foodservice industry will grow by billion in retail sales (in 2013 dollars).
Looking deeper into the forecast yields the following key points:
The restaurant segment will account for 57% of growth over the next five years.
On an overall basis, limited- and full-service operators will grow at similar rates through 2019.
Growth will be strongest among small chains and independents in both segments.
Supermarket foodservice is forecasted to be one of the fastest-growing industry segments (with a five-year CAGR of 4.2%), although its growth is expected to peak in 2015 and 2016.
Performance among contract-managed locations will slightly outpace self-operated locations, with a compound annual growth rate of 2.2% and 1.7%, respectively.
There will be a net increase of 28,900 restaurant and bar units from 2014 through 2019.
Small chains and independents will account for 52% of the net store openings.
Growth in the number of fast-casual units will drive expansion in the limited-service segment.
The total food industry will grow by billion over the next five years, with foodservice accounting for 78% of the growth.
Utilizing sales and unit data, Technomic uncovered long-term operational trends that savvy industry professionals can use to focus today's decision-making. Many of these trends have implications to equipment usage and requirements, which will be discussed in part two of this series in our September 2014 Talk with Manitowoc enews.