This week we compare 2015 forecasts from the National Restaurant Association and Technomic, look at projections for worldwide foodservice equipment sales and update Sysco’s latest efforts to gain approval of its deal to acquire US Foods.
When analyzing the 2015 sales projections from the National Restaurant Association and Technomic, the first thing that pops out is that both predict 1.5 percent real growth. These two studies normally agree with one another about once every ten years.
The two major research organizations are rarely more than a fraction of a percentage point apart. However, a fraction of a percent translates into billions of dollars when dealing with a giant industry like foodservice. But for planning purposes within the business, the forecasts are close enough.
The two forecasts differ when it comes to their outlook for specific market segments. Some of these differences are the result of how each organization defines individual segments and how they arrange their data. One major difference is that the NRA breaks out contractor-operated locations separately from self-operated locations. Technomic does not make this distinction.
As far as retail sales and the equivalent, the NRA projects 2015 sales at $683 billion while Technomic places sales last year at $701 billion. Some observers think the trade association would be the more optimistic.
Finally, it is important to note these are simply projections, subject to change. At no point in the future do we anticipate having actual, verifiable numbers.
Economic News This Week
- First time jobless claims for the week ending January 24 fell to 265,000, a decline of 43,000 – the lowest level since April 15, 2000. The 4-week moving average 298,500, a decline of 8,250.
- Fourth quarter gross domestic product increased 2.6 percent, per the Department of Commerce’s first estimate. This was less than forecasted levels, which were in the 3 percent to 3.5 percent range. One economist dismissed the fourth quarter result, noting that previous two quarters resulted in the best GDP performance since 2005. Assuming the fourth quarter’s 2.6 percent holds up in later estimates, 2014 experienced a 2.4 percent growth in GDP, a slight improvement over the average of 2.2 percent for 2010 to 2013.
- Personal income and personal spending moved in opposite directions in December. The Bureau of Economic Analysis reports personal income increased 0.3 percent while personal spending declined 0.3 percent. The decline in personal spending was the largest since 2009 despite rising income, modest inflation and falling gasoline prices.
- Manufactured durable goods had a rough month in December with new orders down 3.4 percent. Excluding transportation, new orders decreased 0.8 percent. Excluding defense, new orders decreased 3.2 percent. Shipments of manufactured durable goods increased 1.1 percent. Unfilled orders dropped 0.8 percent. New orders for capital goods – goods used to manufacture other goods – fell 9.7 percent.
- The Chicago Business Barometer rose 0.6 percent to 59.4 in January.
- Sales of new single-family homes rose to a seasonally adjusted rate of 481,000 in December. This marks an 11.6 percent increase compared to November. December’s estimate is 8.8 percent more than the same month in 2013. For 2014, the U.S. Census Bureau estimates new home sales were 435,000, an increase of 1.2 percent over 2013.
- Pending home sales declined in December with the index falling 3.7 percent from November to 100.7. The index was up 6.1 percent over December 2013.
- December construction spending rose 0.4 percent over November and was 2.2 percent over December 2013. Residential construction increased 0.3 percent.
- The Conference Board’s Consumer Confidence Index took a major jump in January, rising to 102.9. The Index is now at its highest point since August 2007. The Present Situation Index leaped to 112.6 from 99.9 in December while the Expectations Index rose to 96.4 from December’s reading of 88.5.
- The Gallup Organization’s Economic Confidence Index stayed in positive territory once again this week at 5 percent. This means 5 percent more of those surveyed believed the U.S. economy was in good shape vs. those who did not. The Index has been in positive territory for the month of January after years of showing negative results.
- Global consumer confidence slipped in the fourth quarter of 2014. Nielsen reported the index ended 2014 at 96.2, which is lower than the third quarter but 2 points higher than the fourth quarter of 2013 and 2 points higher than the prerecession level of 94 in the third quarter of 2007.
- The Bloomberg/University of Michigan Consumer Index slipped a hair in the final January report, moving from to 98.1 from the preliminary reading of 98.2. This is still the highest the index has been in 11 years.
Foodservice News This Week
- The global foodservice equipment market will grow fastest in the Asia Pacific area based on research from Transparency Market Research. The study puts worldwide equipment sales at $35 billion (in U.S. dollars) and projects sales will rise 4.5 percent from 2014 to 2020.
- Sysco reports sales up, profits down for the quarter ending December 27. The distribution giant said sales increased 7.6 percent with acquisitions accounting for 0.8 percent of the increase and currency adjustments reducing sales by 0.9 percent. Net profit fell to $158 billion, a decline of 25 percent vs. the corresponding quarter of 2013.
- In a deal with Performance Food Group, Sysco also announced the sale of 11 distribution centers operated by U.S. Foods. Sysco made this deal in order to gain Federal Trade Commission approval for its merger with US Foods. The sale of the 11 distribution centers is contingent upon government approval for the US Foods deal. Sysco says the distribution centers account for $4.6 billion in annual sales. The US Foods distribution centers to be sold are in Corona, Calif.; Denver; Kansas City, Kan.; Phoenix; Salt Lake City; San Diego; San Francisco; Seattle; Cleveland; Las Vegas; and Minneapolis.
- C-Store growth continues. According to study by NACS & Neilson, the number of convenience stores in the U.S. grew to 152,794 in 2014, almost a 1 percent increase over 2013. The convenience store count has roughly doubled in the last 3 decades and now accounts for one-third of all the retail establishments in the US. Single store operators account for 63 percent of all the C-stores and were responsible for 83.5 percent of the unit growth in 2014.
- Marco’s Pizza came in at number 95 on Entrepreneur magazine’s Franchise 500 list.
- U.S. restaurant pizza sales grew to $41 billion in 2104 according to a study by the research firm Packaged Facts. The study said frozen refrigerated pizza sales also grew, with sales exceeding $5 billion.
- 2014 was a “Banner Year” for burgers according to a new study from The NPD Group. Americans ordered 9 billion hamburgers, a 3 percent increase over 2013.
- White Castle’s Las Vegas opening was overwhelming. The Columbus, Ohio-based chain had to close its doors the next day to give their staff a rest and to clean the restaurant. A company spokesman said the restaurant was selling burgers at a rate of 4,000 an hour for the first 12 hours they were open and, that to his knowledge, it was the first time White Castle ever closed because of demand.
- Corporate Stirrings: Shake Shack, Inc.’s initial public stock offering was extremely successful with the stock closing on Friday at $45.90 per share, more than double the selling price of $21 a share. This gives the 63-unit chain a market valuation of $1.6 billion. Muscle Maker Grill, a “healthy” foods chain with 55 restaurants in 11 states, has been acquired by an affiliate of American Restaurant Holdings. Tim Horton’s announced personnel cuts both at its Canadian headquarters and its U.S. offices in Dublin, Ohio.
- Growth Chains: C-store operator Wawa plans to more than double its number of Florida locations to 109 stores. La Madeleine has signed an agreement with an existing franchisee to open 12 more cafes across Texas and Oklahoma. Newk’s Eatery announced a development agreement for 11 restaurants in the Tampa Bay, Fla. area. The Ruby’s Restaurant Group anticipates adding 20 franchised locations this year. Deli Delicious, with 27 restaurants currently, has another 22 “on the books.” Jack in the Box “could” open 5 to 10 more units in Hawaii according to the chain’s CEO.
- Comparable Same Store Sales: Brinker (Chili’s up 4.0 percent & Maggiano’s up 2.3 percent.)
For details and same-store sales of other chains, please click here for the Green Sheet.