Foodservice Comes Into Focus

Retailers continue to chip away at share of stomach

Abbie Westra, Director, Editorial, CSP

[Editor's Note: This is the first in a series of articles addressing the state of foodservice in retail outlets.]

OAK BROOK, Ill. -- First, the good news: after several years of recession, the foodservice sector is stronger than ever. Hudson Riehle, senior vice president of the Research & Knowledge Group at the National Restaurant Association (NRA), said pent-up demand and higher employment rates will lead to record-breaking sales.

"In 2013, restaurant industry sales will reach a record high of $630 billion," Riehle told CSP Daily News. "It's up 3.8% from 2012. It's the fourth consecutive year of sales growth."

And while the past few years have seen sharp rises in spending, The NPD Group, Port Washington, N.Y., anticipates the foodservice sector will have to contend with significantly slower growth over the next decade.

"Overall restaurants are forecasted to grow only 4% over the next 10 years," Bonnie Riggs, restaurant industry analyst for The NPD Group, told CSP Daily News. "But eat-at-home will grow strongly."

A slowdown in restaurant traffic occurred earlier this year due to economic uncertainties, and young consumers in particular have reduced their restaurant visits, prompting a weaker forecast out of the gates.

In addition to fighting the home fridge, foodservice-at-retail operators will have to compete with other foodservice providers for pieces of a slow-growing pie. The NRA forecasts quick-service restaurants (QSRs) will see 4.9% sales growth this year, or 1.7% in real-growth change. Retail-host restaurants, which include convenience stores and grocery, drug and mass, are expected to see a 3.5% sales gain, or 0.6% real growth.

The biggest gains across the foodservice industry are expected from social caterers (5.6% sales growth), managed services at manufacturing and industrial plants (5.2%) and hospitals and nursing homes (5.5%) and hotel restaurants (4.9%).

For Riehle, it is primarily a battle for positioning, and c-stores and other retailers may be in just the right position.

"Growth in the restaurant industry has been driven primarily by convenience, and c-stores, have always been recognized as offering a host of time-saving solutions," he said.

C-stores continue to experience stronger foodservice traffic growth compared to grocery/drug, but grocery still holds the largest piece of the foodservice-at-retail pie; 68% of fresh prepared food sales at retail were generated by supermarkets, according to Chicago-based research firm Technomic, with c-stores providing 20% and mass/club 12%.

All retailers should stay on the offensive as we move further and further away from the recession, when consumers flocked to supermarkets, c-stores and other nontraditional options for convenient, value-driven meals; 38% of today's consumers say that they purchase retail-meal solutions from traditional supermarkets each week--compared to 42% who said the same in 2010, according to Technomic.

The golden ticket for all operators is to know your customer and their specific wants and needs.

"All foodservice sales end up being local," Riehle said. "[It's] the ability to market against spending challenges in that local area."

Click here to see the complete content of CSP's 2013 Foodservice at Retail Handbook.

Abbie Westra, CSP/Winsight By Abbie Westra, Director, Editorial, CSP
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