Published on Tuesday, 23 August 2016
Written by Jerry Stiegler
Restaurants are No.1 with U.S. consumers. Technomic predicts foodservice sales will grow 4.8 percent. Prices for food away from home continue to outpace grocery prices. Different generations have different perceptions of the dinner meal occasion according to The NPD Group. These stories and a whole lot more This Week In Foodservice.
The Gallup Poll reported in its annual survey how U.S. consumers rate various industries and organizations and once again the restaurant industry was first. A strong 66 percent of those studied had a positive view of restaurants, 27 percent were neutral and just 7 percent were totally negative. That gave the restaurant industry a net positive score of 59 percent.
The computer industry was a very close second with 66 percent positive, 19 percent neutral and 13 percent totally negative for a net positive rating of 53 percent. Two food-related businesses came in third and fourth: the grocery industry (36 percent net positive) and farming & agriculture (35 percent net positive.) Accounting, the travel industry, the internet industry, the auto industry, retailing, and real estate rounded out the top ten.
The bottom five started with the petroleum industry with a minus 7 net score, then fourth from the bottom was the legal field (minus 8), with the healthcare industry third from the bottom (minus 20) and the pharmaceutical industry second to last with a minus 23 score.
In dead last, with a minus 27 net score, was the federal government.
Overall, the study confirmed what we all know. Very simply, people like to eat out. As one industry giant of the foodservice field used to say, eating out is a little luxury almost everyone can afford. As we deal with a myriad of problems, ranging from steeply increasing wages to food safety, it is nice to know that the ultimate customer likes and respects what the industry does and how well.
Economic News This Week
- July consumer prices were unchanged from June according to the Bureau of Labor Statistic’s Consumer Price Index. Food prices were also flat for the month while energy prices fell 1.6 percent. This left “core” prices – all items less food and energy prices – up just 0.1 percent. In the last 12 months the CPI is up just 0.8 percent with the “core index” up 2.2 percent. (For details on food prices, please see This Week In Foodservice below.) Initial jobless claims fell by 4,000 To 262,000 in the week ending August 13. The 4-week moving average rose 2,500 to 265,250. This measure of the health of the U.S. employment picture continues to be encouraging.
- The Conference Board Leading Economic Index rose by 0.4 percent in July following a 0.2 percent increase in June and 0.1 percent decline in May. The Conference Board says this latest report suggests that moderate economic growth should continue for the rest of 2016.
- Industrial production rose 0.7 percent in July after increasing 0.4 percent in June. From July of 2015 to July of this year Industrial Production is down 0.5 percent. The U.S. Federal Reserve also reported that capacity utilization rose 0.5 percent to 75.9 percent, a rate that is 4.1 percentage point below the its long-run (1072-2015) average.
- The Federal Reserve Bank of Philadelphia’s Manufacturing Business Outlook Survey was “weak” in August. The Manufacturing Activity Index rose 5.0 points, but just to +2.0. (Any number above zero shows increasing activity.) The New Orders Index plunged from +11.8 in July to minus 7.2 in August. The Shipments Index edged up to 8.4 from 6.3 in July. The Unfilled Orders Index dropped to minus 15, while the Employment Index fell 18 points to minus 20, which is the largest negative reading this year.
- Privately owned housing starts in July rose 2.1 percent from June to 1.2 million on an annual seasonally adjusted basis. This was 0.9 percent below July 2015. Single family starts were up 0.5 percent from June. Building permits for privately owned housing units were at seasonally adjusted annual rate of 1.1 million, which is down 0.1 percent from June. Single family permit authorizations were down 3.7 percent from June.
Foodservice News This Week
- Technomic’s new 2016/17 Food Industry Universe Forecast predicts foodservice sales will grow at a 4.8 percent rate, while retail will grow at 3.0 percent. Further, Technomic forecasts the fastest growing food channels will be online, fresh format, supermarket fresh prepared foods, limited assortment stores and independent restaurants/small chains.
- Washington, D.C. has been a great place for fast-casual startups. The national capitol has been a good testing place given its youth-skewed demographics, including many of whom are health conscious and willing to try new menu items. Plus rent expenses are more reasonable, at least as compared to New York City. One operator pointed out that D.C. had a highly mobile population who move to other parts of the country, creating a ready-made customer base when fast-casual chains expand.
- Consumer food prices were flat in July vs. June with food at home prices down 0.2 percent and food away from home prices up 0.2 percent, according to the Consumer Price Index. In the past 12 months food at home prices have declined 1.6 percent, while food away from home prices are up 2.6 percent. That leaves an almost a 4.5 percent spread between eating out and dining in. This is the problem that Wendy’s CEO articulated at the chain’s quarterly financial report and was reported in last week’s This Week in Foodservice.
- How people determine “What’s For Dinner?” depends on age according to a new study from The NPD Group. Millennials want personalization and control and have shifted some meals from dining out to in home. Gen Xers plan dinner meals around family and calendar while Boomers, many of whom are empty nesters facing health concerns, are shifting some meals from in-home to restaurants.
- Performance Food Group’s latest fiscal results show case volume for the quarter up 5.8 percent and net sales up 1.9 percent. For the fiscal year, case volume rose 4.8 percent and net sales up 3.4 percent. Net income decreased 14.6 percent for the quarter, but rose 17.2 percent for the year. The figures above were for an extra week in this reporting period.
- Gordon Foodservice will close its distribution center in central Pennsylvania. The facility will close in January of next year with the loss of 120 jobs. The reason cited for the closing is “proximity of the facility to our customers in the region.”
- Corporate stirrings: Buffalo Wild Wings received a letter from Marcato Capital Management that was critical of BWW management, particularly for the company’s stock buy-back program and its purchase of restaurants from franchisees. Marcato, which owns a little over 5.0 percent of BWW’s stock, wants BWW to refranchise company-owned units and make other changes. Buffalo Wild Wings responded cautiously, saying they have met with Marcato and will continue to have discussions with them and all stockholders. GK Services of Minneapolis has agreed to be acquired by Cintas Corp. for $2.2 billion cash. Both companies are suppliers of uniforms to the foodservice industries.
- Growth Chains: Pizza Hut has signed a franchise development agreement with a franchisee (who operates 80 locations in Czechoslovakia, Poland and Russia) to open a minimum of 300 sub franchises in Eastern Europe in the next 5 years. Chick-fil-A will open 12 restaurants in New York city next year. Dickey’s Barbecue Pit will open 5 restaurants in Southern California. Dunkin’ Donuts has signed a multi-store franchise development agreement for 15 units in the Minneapolis-St. Paul area. The Dunkin’ Donuts Chicago franchisee has started construction on a restaurant with plans for 7 more to follow. Marco’s Pizza plans to open more than 30 locations in the Phoenix area “through strategic franchise partnerships.” Crushed Red has signed a franchise development agreement to open a minimum of 20 restaurants in Arkansas, Kansas, northern Texas and Oklahoma. ModPizza is planning to open11 locations in Houston. Arooga Grill House & Sports Bar has a multiunit franchise agreement for at least 10 restaurants in Long Island and Queens in New York.
- Comparable Store Sales Reports: Famous Dave’s down 6.4 percent and Popeye’s Louisiana Kitchen flat.
For details and same-store sales of other chains, Please Click Here for the Green Sheet