Bottom’s Up?

One of the (many) unfortunate aspects of downward business spirals is that they never call ahead to let anyone know they are coming. Once the tumultuous periods come to an end, nobody announces that the business environment has stabilized. Such is the situation for today’s foodservice industry.

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Joseph M. Carbonara, Editor in Chief
Joseph M. Carbonara, Editor in Chief

By all indications, most foodservice companies have spent a considerable amount of time this year searching for stability. And with good reason, as 71 percent of operators reported their traffic was either down (39 percent) or flat (32 percent) compared to last year. As a result, foodservice operators adjusted staffing levels, menu strategies and even portion sizes to meet the challenges of the business climate, according to FE&S’ 2010 Forecast Study.

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In addition, foodservice operators continue to tinker with their purchasing patterns. Chief among these efforts are increased use of contract purchasing; greater use of coupons, rebates and other incentives; more use of group purchasing; placing smaller but more- frequent orders with suppliers, and purchasing more staple ingredients for from-scratch preparations.

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Foodservice equipment and supplies dealers made similar adjustments in terms of staffing, marketing and the like. When it comes to purchasing habits, the top five ways dealers coped were to maintain lower inventory levels; consolidate purchases with manufacturers for better pricing; make smaller, more frequent purchases from suppliers; and, in other instances, make larger, less frequent purchases from suppliers for better discounts.

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The net result of these changes appears to be a stronger foodservice industry, one in which the individual players working more closely together than before.

“For so many years things were so strong and we were in this whirl wind of good, strong business. When you are in that kind of a growth mode, sometimes you are not spending the time on the infrastructure that you are today because we were profitable and there was a lot of business to chase,” said Kim Gill Rimsza, president of TriMark/Gill Marketing and president of the Foodservice Equipment Distributors Association. “We are all in this together and everyone’s felt the impact of this downturn. We all have to work together and there’s a partnership there.”

One such example of that partnership is the way manufacturers are working with their dealer customers regarding pricing. Instead of issuing price increases across the board, some factories are questioning whether increases are even needed, and some manufacturers are exploring how they can confine increases to one or two lines. “I think the manufacturers have been very open to helping the dealers where they can,” Rimsza said

This kind of community spirit will remain critical as the individual members of the foodservice industry work diligently to maintain this stable climate for the foreseeable future. That’s because these signs of stability don’t directly translate into a period of rapid recovery.

“From the operator and consumer segment, there are still forms of anxiety that will affect both camps beyond the next three to six months,” says Hudson Riehle, the National Restaurant Association’s (NRA) senior vice president of research and information services division. The NRA’s Restaurant Performance Index remains at historic lows, nowhere near the levels that would indicate normal growth and menu price inflation continues to run high relative to past years.

The fact remains that no one economic event will trigger rapid recovery for foodservice. Each company must rebuild, one customer at a time. The good news is that after the past 18 months, there’s nowhere to go but up.

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