Like the snack-centric consumers it feeds, today’s foodservice industry is more prone to many small bites of sales growth vs. great big gulps.
Despite 360-degree attacks from Obamacare, commodity costs and recession-weary consumers, the industry is expected reach a record high of $683.4 billion this year—a 3.6% increase over 2013.
“The good news is 2014 represents the fifth consecutive year of sales increases for the restaurant industry. The growth rates still remain more moderate compared to the onset of the recessionary period back in 2008 and 2009,” says Hudson Riehle, senior vice president of the National Restaurant Association’s (NRA) Research and Knowledge Group.
So what’s the bad news? That depends on your segment, but industrywide pain points include the 20% of consumers who assess their personal finances as “poor,” according to the NRA. Another 38% report their personal finances as “fair,” while 33% say they are in “good” financial health; 8% feel they are in “excellent” standings.
Recent increases in commodity costs have also rankled operators. “Cheese is up 19%, eggs are up 18%, pork is up 16%,” says Riehle. “Dependent upon what the menu theme is, it can be dramatically different than the index increase.”
Even more than usual, operators can’t simply raise menu prices to make up for those commodity costs. “Over the past decade wholesale food price increases are substantially above menu price increases,” Riehle continues. “What that means is operators have to look for additional internal operating efficiencies.”
When comparing segments, some non-commercial and managed-services areas—including self-op and managed college and university and self-op business and industry—are among the few that are expected to see a decline in real sales growth this year.
Limited-service restaurants are projected to experience a 4.4% sales growth, or 2.1% real growth change. Retail-host restaurants, meanwhile, are among the top operators in terms of projected sales growth, according to NRA numbers. The segment, which includes convenience stores, is expected to increase sales by 5.1%, or 2.7% in real growth. That is topped only by hospitals and nursing homes run by managed services, and hotel restaurants.
“If you look at the growth of foodservice at convenience stores, that growth rate is substantially above the overall industry growth rate,” says Riehle, with the caveat that c-stores are starting from a much smaller base. “The challenge is to remain top of mind among consumers as being a convenient meal solution.”
It’s not necessarily c-stores as a segment that’s attracting consumers, but rather any concept that allows for grabbing and going. Today, more than 70% of all restaurant traffic is off-premise, reflecting a major flip in the past 50 years.
In fact, c-stores experienced a sales slowdown in 2013. Total category sales rose only 2.4% in 2013, according to preliminary data shared at the NACS State of the Industry (SOI) Summit earlier this year. That’s compared to an 8.7% increase in 2012. Quick-service chains McDonald’s and Wendy’s each saw a similar or greater same-store growth rate over the past two years, but they grew off a much greater sales base.
As the year continues, headlines will be dominated by breakfast battles, the ongoing snack attack and growth in grab and go, as operators place their bets on these bright opportunities to turn consumers into customers.
Foodservice Food & Drink Sales, 2014 Projections
| Segment | 2013 projected sales ($ billions) | 2014 projected sales ($ billions) | ’13-’14 % change | ’13-’14 % real growth change |
| Table-service restaurants | $207.0 | $212.4 | 2.6% | 0.2% |
| Limited-service restaurants | $187.1 | $195.4 | 4.4% | 2.1% |
| Retail-host restaurants* | $36.5 | $38.3 | 5.1% | 2.7% |
| Hospitals and nursing homes (managed services) | $5.7 | $6.0 | 5.4% | 2.9% |
| Hospitals (self-op) | $16.5 | $17.0 | 3.2% | 0.6% |
| Nursing homes (self-op) | $8.3 | $8.5 | 2.7% | 0.5% |
| Colleges and universities (managed services) | $14.8 | $15.2 | 2.5% | -0.5% |
| Colleges and universities (self-op) | $7.6 | $7.7 | 1.9% | -1.1% |
*Includes convenience, drug, grocery and other retail segments
Source: National Restaurant Association
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