Stealth firm tries to unite and dominate the U.S. beverage market. Consumers blame eating out for ruining their budgets. Foodservice hiring was steady in February. Walmart readies a move into the prepared meal business. These stories and a whole lot more This Week in Foodservice.

JAB, an almost 200-year-old German firm, has been quickly establishing the company as a major force in the U.S. with its acquisition of coffee and other beverage-related concepts. The Wall Street Journal points out the company sells coffee in nearly every form and venue. For example, JAB owns Peet’s, Krispy Kreme, Panera Bread Company, Caribou, and others. The company also sells in both grocery and foodservice. And JAB distributes brands it doesn’t own such a Dunkin’ Donuts and Starbucks via its Keurig K cup operation, despite the fact the company competes directly with these two giants in the foodservice segment.

JAB is privately held, which in theory limits the company’s access to capital, but no one would ever know it the way JAB has gone on an acquisition rampage, with the most recent purchase being the Dr. Pepper Snapple Group. After buying Peets, that company bought the high-end coffee shop chains of Stumptown and Intelligentsia along with the tea company, Mighty Leaf.

JAB’s chairman has stated plainly that the company’s fight is not with Starbucks but with the world’s number one coffee purveyor, Nestle.

Economic News This Week

  • Consumer credit increased 4.3 percent in January on a seasonally adjusted annual basis, per the U.S. Federal Reserve. Revolving credit, mostly credit card debt, rose just 0.8 percent for the month. Non-revolving credit – auto loans, student loans, etc. – rose 5.6 percent.
  • New orders for manufactured goods decreased 1.4 percent in January. The number of new orders had increased in the previous five months. The U.S. Census Bureau’s full report for January also showed shipments rose 0.6 percent while the number of unfilled orders fell 0.3 percent. New orders for manufactured durable goods decreased 3.6 percent, led by a 10.0 percent decline in new orders for transportation equipment.
  • Labor productivity was essentially unchanged in the fourth quarter. From the fourth quarter of 2016 through the fourth quarter of 2017 productivity increased 1.1 percent, reflecting a 3.2 percent increase in output and a 2.1 percent increase in hours worked. Unit labor costs rose 2.5 percent in the fourth quarter of 2017 and increased 1.7 percent over the last 4 quarters.
  • The February Institute for Supply Management’s Manufacturing Index continued to show increased manufacturing activity as the index rose 1.7 percentage points to a level of 60.8. (Any reading greater than 50 indicates growth.) The New Orders Index fell 1.2 percentage points to a final level of 64.2 The Production Index also fell to 62.0, a dip of 2.5 percentage points. In contrast, the Employment Index increased to 59.7, a bump of 5.5 percentage points. This marks the 106th consecutive month economic activity increased in the manufacturing sector. Of the 18 manufacturing industries surveyed, 15 reported growth in February.
  • The Institute for Supply Management’s Non-Manufacturing Index decreased the rate of growth slightly in February. The index totaled 58.5, a dip of 0.4. (Any reading more than 50 indicates increased economic activity.)
  • ADP reports U.S. employers added 235,000 jobs in February. The payroll processing company said all size businesses were hiring heavily with small firms (1-49 employees) adding 68,000 employees, midsized companies (50-499) adding 97,000 employees, and large firms (500+ employees) adding 70,000 to their payrolls. ADP said the leisure and hospitality sector hired 50,000 new employees.
  • Initial unemployment claims climbed to 231,000, an increase of 21,000 for the week ending March 3. The less volatile 4-week moving average increased to 222,250, a jump of 2,000. The number of claims remain low by historical standards.
  • The U.S. Bureau of Labor Statistics calculated the U.S. economy added 313,000 new jobs in February. This represents the largest increase since July 2016. Unemployment stayed at 4.1 percent for the fifth consecutive month. Another positive aspect of this month’s report was 800,000 people joined the labor force in February. Excluding months with onetime census hiring, this is the biggest increase in the labor force since 1983. Economists believe moving more people into jobs will allow the economy to expand without causing inflationary pressures. (For foodservice hiring last month, please see Foodservice News This Week below.)

Foodservice News This Week

  • Foodservice operators added 11,000 new workers in February. While not a stellar hiring month, it still represents 4.0 percent of the total private sector jobs added in February.
  • Walmart will offer prepared meals. The retail giant sells 10 different meals at 250 stores and expects to expand its prepared meals program to 2,000 stores by the end of the year. Further, Walmart will introduce $15 meal kits, similar to the ones Blue Apron sells. Fortune magazine sees the Walmart’s move as a direct threat to restaurants.
  • Consumers cite eating out as the reason they exceed their budgets, according to recent study. All age groups in the study say they overspend on food and beverages and say it is their number one budget buster. Looking at the study by segment, 20 to 29 year olds exceed their budget by 40 percent, 30 to 39 year old’s at 34 percent, 40 to 49 at 39 percent, 50 to 59 at 36 percent and those 60 and older at 33 percent. The study quotes the head of economics for Bank of America Merrill Lynch as being surprised how soft restaurant spending is given where the U.S. is in the business cycle. Looking at why Millennials continue to reduce their food away from home purchases, it was noted they carry heavy student loan debt and facing far higher home prices than previous generations at this stage in their development.
  • Starbucks vs. Dunkin’ Donuts: Starbucks may have an advantage over its rival since they lease store space while Dunkin’ Donuts relies on franchisees who own their stores. But Starbucks, who runs its own stores, may be able to take advantage of falling rental prices as many retailers are reducing the number of their locations due to online competition.
  • Wings N’ Things announces changes. The family-owned, San Diego-based chain changed its name to Epic Wings N’ Things, hired a president from outside the family and established a franchise program with a goal to take the 19-unit chain national.
  • Corporate Stirrings: Taco Mac, sports bar with 38 locations, was purchased by Atlanta-based Fresh Hospitality. The press release stated that no immediate changes were planned. Price of the sale was not given. Former Denver Bronco quarterback Payton Manning has sold his stake in 31 Denver-area Papa John’s restaurants. More recently Papa John’s founder and CEO John Schnatter had some words about the NFL and the pizza chain withdrew as the official NFL pizza. Manning sold his interest in the local Papa John’s to another franchisee although he has a long term contract as the Papa John’s spokesman.
  • Comparable Store Sales Reports: Casey’s General Store up 1.7 percent, Chuy’s up 1.3 percent, Diversified Restaurant Holdings down 6.8 percent and J. Alexander’s Holdings (J. Alexander’s up 2.3 percent and Stony River Steakhouse up 7.3 percent.)

For details and same-store sales of other chains, please click here for the Green Sheet.