- Published on Tuesday, 28 January 2014
- Written by Jerry Stiegler
This week we compare the National Restaurant Association's 2014 Forecast to Technomic's updated numbers and explore the significance of a variety of foodservice-related economic indicators.
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The National Restaurant Association forecasts foodservice industry sales will increase 3.6 percent in total dollars in 2014. Real growth, meaning the increase in sales after adjusting for menu price inflation, will be 1.2 percent, according to the NRA. With the exception of airline feeding, the NRA projects all segments will see dollar growth. This will be the fifth straight year of real growth for the foodservice industry, according to the NRA. The NRA projects sales for restaurants and bars, which account for roughly 70 percent of foodservice dollar volume, will rise similarly to the overall forecast rates of +3.6 percent and +1.2 percent.
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And, Technomic, the Chicago-based market research firm, just revised its 2014 forecast to project a 3.6 percent increase in dollar growth and 1.1 percent in real growth. This represents an increase from Technomic's previous estimate, which called for 2.5 percent dollar growth and 0.5 percent real growth. So, in general, both major industry forecasts are pretty much in synch with one another, save for some variations that we can chalk up to methodology and some simple judgment calls.
The take away from all this? Assuming the prognostications are correct, the foodservice industry can expect a decent but far from fantastic year in 2014. While a $20 billion dollar sales increase is certainly not small change, it will not drive a huge increase in supplier sales. The rising tide may lift all boats but in the case of foodservice, this year it isn't going to lift them very far.
In other words, 2014 will bring more of the same. Suppliers will have to scratch and claw by introducing new products, targeting those operations experiencing better than average growth, and developing sales and marketing programs to take share from competitors.
Economic News This Week
- First-time jobless claims stayed relatively even for the week ending January 18. The number of claims totaled 326,000, an increase of 1,000. The more reliable 4 week moving average was 331,500, a decline of 3,750. While still somewhat high by historical measures, initial claims do seem to be trending down, which could point to an improving jobs picture.
- Existing home sales increased 1.0 percent in December over November to a seasonally adjusted 4.87 million homes, according to data from the National Association of Realtors. A total of 5.09 million homes were sold last year, a 9.0 percent increase over 2012 and the highest level since 2006. Home prices increased 9.9 percent compared to December 2012 and the number of foreclosure sales decreased by one third.
- New home sales fell 7.0 percent in December vs. November. Sales increased 4.5 percent compared to December 2012. Median prices climbed 0.6 percent from November and 8.4 percent from a year earlier. For the year the Census Bureau says 428,000 new homes were sold, a 16.4 percent compared to 2012. Rising interest rates and more regulations may weigh on new home sales this year but some experts see banks as becoming more flexible in order to increase their home loans.
- The index of leading economic indicators tracked by The Conference Board rose 0.1 December after a 1.0 percent rise in November. The Conference Board believes the indicators point to a slow but steady improvement in the U.S. economy for the next six months.
- Consumers' confidence in the U.S. economy ticked down last week to minus 16 from minus 13 the week before. The Gallup Organization cites December's low job creation rate as the primary reason for decline.
Foodservice News This Week
- Fast food is not the main culprit in childhood obesity, according to a just released study from the University of North Carolina. Rather, the research found that "poor eating the rest of the day is most strongly linked to weight issues." The research project received no funding from the fast food industry.
- McDonald's has lost relevance with the market according to Don Thompson, the chain's CEO. This came as the burger giant reported global comparable store sales were up 0.2 percent for 2013.
- Americans will eat 1.25 billion chicken wings on Sunday, an increase of 20 million wings over last year, according to the National Chicken Council. Foodservice operators will account for 75 percent of the volume, with grocery stores generating the other 25 percent.
- A taxing pizza dilemma has arisen. According to a USA Today article, some states do not assess a retail sales tax to food sold in grocery stores, while taxing food sold in restaurants. Some states have an exception to the latter statement, opting not to tax takeout orders. Officials in some states are struggling with the law as it applies to take and bake pizza, sold by such operators as Homemade Pizza Co. Theoretically, since takeout is the only option for the products these operators sell they should be exempt from sales tax. Some states, though, are considering taxing it. Papa Murphy's has been pushing to get the issue settled.
- The U.S. added more than 2,000 C-stores in 2013. The industry now has 151,282 locations, an increase of 1.4 percent, according to the just released 2014 NACS/Nielsen study. C-Stores account for more than 34 percent of all U.S. retail outlets.
- Smashburger earned spot on Forbes' list of "America's Most Promising Companies." The burger chain was listed as Number 6 on the magazine's list of 100 firms and was the only restaurant company included.
- Severe winter weather hurt Bob Evans' sales. Steve Davis, the company's CEO, said this along with other factors will affect Bob Evans' financial performance in the company's third fiscal quarter, which ended January 2014, 2014. It is common for restaurants to cite snow, ice and low temperatures for weak sales this time of year. Given the weather in the East and Midwest this year we can expect more chains to attribute weak sales results to Mother Nature.
- Popeye's parent company has changed its name. Previously known as AFC Enterprises, the company's corporate name is now Popeye's Louisiana Kitchen, Inc.
- Growth Chains: Krispy Kreme will develop 20 stores in Southern California in the next 7 years. Krispy Kreme also plans on opening 23 stores in China over the next 5 years. Corner Bakery Café has 300 new cafes in development including new locations in Alabama, Indiana, Minnesota, North Carolina and Tennessee. Subway plans on having 1,300 units in the United Kingdom and Ireland by 2020. Toppers Pizza plans to open 20 new restaurants this year. Quaker Steak n Lube, which opened 8 new locations last year, plans to open 11 in 2014. The Dunkin' Donuts' franchisee in Oklahoma City has plans for 13 new stores.
- Comparable Store Sales Reports: Brinker (Chili's up 0.3 percent & Maggiano's up 0.9 percent), Good Times Burgers (up 17.4 percent), McDonald's (down 1.4 percent), and Starbucks (up 5.0 percent.)
For details and same-store sales for other chains, please click here for the latest Green Sheet.