What’s hot in the USA - The Great Foodservice Recession
Peter Backman, Horizons’ MD, reports on current developments on the US foodservice scene from discussions with leading players and news from the National Restaurant Association Show in Chicago:
The natural bounce seems to have gone from the US foodservice sector to be replaced by a pragmatic, almost world-weary, pragmatism. It’s almost a case of Europe taking over the USA.
The US foodservice market is in its third year of decline. The length and depth of this downturn is unprecedented and is the background against which all comments and views about the large US market should be seen.
The good news is that the rate of decline has fallen and may even have bottomed out but there is still enough uncertainty to make any projections problematic.
Nevertheless there are still lessons to be learned from what is happening in the US foodservice market, which is why I make an annual trip to the NRA Show in Chicago. This year booth numbers were about the same as last year - 1,700 or so but down from the 1,900 in 2008. Visitor numbers appeared to be up considerably above last years’ and exhibitors told me that the quality of visitors, and their decision-making responsibilities, were significantly better than last year. I was told: “Visitors are only coming to the show if they really want to do business – they don’t have time to waste”.
1. Starting at about the time of the Lehman crash, the US foodservice sector turned negative for only the fourth time since 1971. And previous downturns have lasted at most a year and amounted to a fall of well under 1% each time.
2. The Great Foodservice Recession – as many already refer to it – has proved to be a different beast. The decline is 2008 was the worst ever up to then. Last year the market declined even faster, and although market forecasters see an improvement this year, the market will still be in negative territory for the full 2010 figures.
3. Overall the foodservice market will have fallen by between -5% and -15% depending on whose figures you use. A useful headline figure therefore is a real decline of -10% since 2008.
4. One reason for the depth of the downturn is that, for the first time since the 1930s, the top quartile of earners has seen a real reduction in spending levels. These people are essential to the restaurant sector and as a consequence of the trickle down effect also influence what happens in the Quick Service sector.
5. Another driver of the foodservice recession is the high level of unemployment – currently 10% and growing. But may also note the also high levels of underemployment which results in reduced pay packets. Together,unemployment and underemployment probably account for 18% of the working population.
6. The wider political and economic environment, of course, also impacts on the foodservice sector. The dramatic rise and subsequent fall in the popularity of President Obama, the passage of health care legislation, the Louisiana oil spill all exist in the background and to the extent that they affect consumer spending and confidence they have an impact of eating out. But the other factors covered in this note are more significant for the sector as a whole.