The Foodservice at Retail Handbook

Retailers continue to chip away at share of stomach.

Abbie Westra, Director, Editorial, CSP

Article Preview: 

First, the good news: After several years of recessionary pains, the foodservice sector is stronger than ever. Hudson Riehle, senior vice-president of the Research and Knowledge Group at the National Restaurant Association(NRA), Washington, D.C., say spent-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 says. “It’s up 3.8% from 2012. It’s the fourth consecutive year of sales growth.”

But for the customer, perception is reality. Strong fundamentals are a heartening sign, but individual customers are still not inclined to spend freely.

“Consumer confidence is always quite closely linked with employment growth and availability of jobs,” Riehlesays. “Consumer confidence remains at fragile levels.”

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,” says Bonnie Riggs, restaurant industry analyst for The NPD Group. “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.

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 QSRswill see 4.9% sales growth this year, or 1.7% in real-growth change. Retail-host restaurants, which include c-stores and grocery/drug/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’s 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 timesaving solutions,” he says.

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

All retailers should stay on the offensive as we move further and further away from the recession, when consumers flocked to c-stores, supermarkets and other nontraditional options for convenient, value-driven meals. Thirty-eight percent 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 says. “[It’s] the ability to market against spending challenges in that local area.”

Click here to download full article