This Week in Foodservice: May 22,2012

Longtime foodservice industry observer Jerry Stiegler shares some economic and foodservice industry-related data.

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Foodservice Forecasts

Forecasts are part of almost everyone's business. Unfortunately, humans don't seem to be well equipped to see into the future. And even though a significant part of the information we provide consists of forecasts, we recognize that a lot of these efforts are flat out wrong. But all is not lost with faulty forecasting. In fact, sometimes it is really good that forecasts are off the mark.

For example, remember not too many weeks back we were told to expect to pay five bucks or more a gallon for gas this summer? The experts saw all kinds of problems arising in the Middle East, especially in Iran. The financial people who follow the restaurant market got very uneasy and warned there could be extremely dire circumstances when it comes to the purchases of food prepared away from home. Now many of these experts were not just making a forecast, they were commodity traders who were betting their money that the price of oil would continue to rise.

One of the few contrary opinions was that of the oil minister of Saudi Arabia who kept saying that there was plenty of oil. Now the Mideast could blow up tomorrow and oil might go to $150 a barrel as one expert predicted this past winter — or maybe the guy who was quoted in the Wall Street Journal last winter as saying oil would hit $500 a barrel could be right. Meanwhile, I paid $3.46 for a gallon of unleaded regular the last time I filled up. Now, how about those predictions two years ago that gold would go for $3,500 an ounce?

The Economy This Week

  • First time jobless claim filings came in at 370,000. This is not high enough to have economists press the warning button but still too high to make employment observers feel comfortable.
  • The Gallup Poll reported their unemployment survey for mid-May slid to 8.2 or 8.5 when adjusted for seasonal variations. The methodology for Gallup's employment study is significantly different from that used by the U.S. Bureau of Labor Statistics.
  • Falling gasoline prices pushed the Consumer Price Index for April to the lowest level in a year. Prices for natural gas and fuel oil also fell. But prices for food, medical care, rent, automobiles, and airfare all rose. "Core" inflation, without food and energy prices, was up 0.2 percent. Overall, the Index for April was unchanged from March while total prices are running 2.3 percent higher than a year ago.
  • Wages remain stagnant but the number of hours worked have increased putting more money in consumer pockets.
  • Industrial Production rose a healthy 1.1 percent in April while Capacity Utilization increased as well, from78.4 in March to 79.2. The NY Federal Reserve's Manufacturing Survey shot up to 17.1 in May from 6.6 in April. But, the Philadelphia Fed's business outlook survey dropped into negative territory in May. The Index was minus 5.8, which was a huge drop from +8.5 in April.
  • There was some good news this past week in the depressed housing market. Builder confidence gained five points in May according to the National Association of Home Builders/Wells Fargo Housing Market Index. This is the highest reading since May of 2007. Actual housing starts increased 2.6 percent but building permits issued fell 7 percent.
  • The Leading Economic Indicators unexpectedly fell 0.1 percent in April.
  • Gallup reports that American's optimism has recovered from its low point in late May/Early June 2008. Now 63 percent of those surveyed said they'd be better off in a year while 21 percent said they'd be worse off.

Foodservice This Week

  • USA Today, quoting a Rand Corp. study funded by the Robert Wood Johnson Foundation, said that 96 percent of the entrees offered by top U.S. chains exceeded the daily limits for calories, sodium, fat and saturated fat. The article was not clear if the entrees exceeded all four guidelines or just one. The story went on to call appetizers "calorie bombs" and said entrees at family restaurants were higher in calories, fat and sodium than at fast food restaurants.
  • A widely quoted study by The Harris Poll said that seven out ten Americans will cook more at home to save money instead of eating out. We've been reading similar statements like this for the last several years but if the survey respondents actually followed through on their intentions restaurant traffic would probably be down by double digit figures. The fact is that people like to eat out and many of them simply don't have time to cook.
  • According to Technomic, fast-casual chains continue to be the fastest-growing segment of the foodservice industry with the Top 150 fast-casual chains increasing sales by 8.4 percent in 2011.
  • CSNews reports the top 100 convenience store chains added 1,700 stores net in the past year. This is a 3 percent increase, which gives the major players at 59,434 stores. The entire C-store market now has 148,126 units.
  • Bloomberg News says a survey indicates that U.S. feedlots reduced cattle purchases by 12 percent in April, which is the biggest decline in three years. It is quite likely that beef prices will increase significantly, perhaps to record high levels, the second half of the year.
  • 7-Eleven intends to open at least 630 new stores this year in the United States and Canada, up from the 600 new store openings in 2011. Some of the additional units will be the result of the purchase and conversion of other C-store brands. Sweet Frog Self Service Yogurt plans on growing their current 60 stores to approximately 200 by the end of this year. Hurricane Grill & Wings has signed 5 development agreements that will add 28 more restaurants to the 46 they currently have. Subway plans on adding 1,200 stores in North America this year. The chain has opened 900 new stores this year in 58 countries, 42 US states and 7 Canadian provinces.
  • Chains reporting comparable store sales results this week are:
    • Ark Restaurants – up 8.2%
    • COSI – up 7.5%
    • Cracker Barrel – up 3.1%
    • Fazoli's - Company owned – up 10.9% & Franchised up 4.2%
    • Jack in the Box – System up 4.2%, Company owned up 5.6% & Franchised up 3.6%
    • NPC International – up 5.1%
    • Pizza Inn – up 1.1%
    • Qdoba – System up 3.0%, Company owned up 3.8%, & Franchised up 2.2%
    • Red Robin – up 0.5%

Detailed information on chain comparable store sales can be found by downloading the Green Sheet.

Foodservice Industry Equipment Supplier Financial Data can be found here.

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