Passing Time during a Slow Economic Recovery

While researching FE&S' 2011 Foodservice Forecast article, which is due out later this week, it became clear to me that the entire industry was preparing to emerge from a period of intense and possibly unprecedented introspection. With economic growth grinding to a painful halt, foodservice companies from all segments were left with little choice but to take a long, hard look at their businesses and make the necessary adjustments that would boost productivity and lower costs.

Many foodservice companies went line item by line item examining their processes and costs and made some very difficult decisions. Even foodservice operators looked at their prototype units to find ways to make them even more efficient and profitable.

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What I learned while attending MAFSI's 2010 Annual Conference in San Antonio is that the foodservice industry is not alone. Business investment is going into productivity growth and not new physical plant, noted Martin Regalia, senior vice president and chief economist for the U.S. Chamber of Commerce. Regalia served as one of the conference's keynote speakers. Increased productivity is not great from an economic sense because it does not lead to job growth, the lack of which is keeping the economy from reaching its potential, he added.

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"It's not all bad news. It's just not as good of news as we would like to hear," Regalia said.

Some of the positive signs Regalia pointed out is the fact that the manufacturing sector is coming back. And other businesses are proving to be profitable but that's mostly due to cost-cutting measures and gains in profitability. Still, even these businesses have to invest in themselves at some point, replacing old equipment with newer more efficient items. And that's certain to be a positive factor in the economic development.

"Investment-lead economic recoveries are not normal. Consumption-led recoveries are normal," Regalia said. "Why do you invest? Normally it is to meet additional demand."

Regalia estimated that it will be another year before the economy rebounds to the point that it will be producing jobs at a rate that calms consumers' fears.

So what should the foodservice industry do in the interim?

Operators need to continue to emphasize value and convenience to their customers. Specifically, operators need to promote that consumers can still come in to eat, and it won't cost as much as it once did, Technomic's Darren Tristano told me during a recent interview. To that point, 60 percent of the operators participating in FE&S' 2011 Forecast Study said they are adjusting their menu strategy to include more value items.

From a supply chain perspective, it is really important for dealers, reps, factories, consultants and service agents to spend time analyzing their customers' businesses and offer process improvement suggestions that have not yet crossed the operators' minds. During the operator roundtables at MAFSI the speakers made it clear that they want their foodservice partners to help them solve their problems and not just try to sell them something. In other words, show the customers that the proposed solution meets their specific needs and is not just another brown box that needs to be moved.
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