The following article was first published in the March 2010 issue of the Technomic Viewpoint, and is reprinted with permission. A .PDF version of the article appears here.
Bob Goldin, Executive Vice President, Technomic
As we are all painfully aware, against the backdrop of a brutal, lingering recession, the foodservice industry is in a slump that is unprecedented in its length and severity. If the industry declines at our forecasted 3 percent rate in 2010, by the end of the year it will be 12 percent smaller than it was in 2007 (in constant dollars). At manufacturer shipment value, that is a contraction of $20 billion; in retail sales, it is $65 billion. That is a lot of ground to make up.
Despite some improvements in the overall economy, the foodservice industry has not (yet) turned the corner. It is still plagued by declines in both traffic and check averages and net unit closures. Foodservice has traditionally been a lead indicator, but it now appears to be a lag one. No surprise, given the impact the bleak employment situation and housing market are having on consumers' willingness to spend.
Technomic recently completed comprehensive five-year, segment-by-segment projections. We also conducted a major consumer attitude study. Along with macro-economic perspectives provided to us by our Consulting Economist, Dr. Arjun Chakravarti, the qualitative and statistical consumer data provide important input into our long-term forecast.
Our research shows that consumers still very much enjoy the foodservice experience, somewhat regret having had to cut back, and want to resume spending on “small indulgences” like foodservice. However, they are much less well-off than they were a few years ago, are concerned about job security, stagnant wages, benefit cuts and tax increases, and fear that inflation will ramp up. As a consequence, consumer spending on foodservice and other similar discretionary items will be constrained for the foreseeable future.