The Business Barometer fielded by the Manufacturers’ Agents Assn. for the Foodservice Industry posted a strong gain in the second quarter as overall sales rose 19.1% compared to those during the depths of the pandemic recession last year. All four product indices posted double-digits gains from a high of 32.5% for tabletop to 15.9% for furniture. Equipment sales rose 17.7% and those for durable supplies 18.1%.

Sales increases in Canada led the regions, up 31.6%. Canada stayed closed longer and also had the disadvantage of not being able to do outdoor dining as early last year. Sales in the West rose 23.7%, and those in the Northeast 21.2%; the gain in the Midwest and South was 15.4%. MAFSI; 2Q-21 Business Barometer

Michael Posternak, retired from PBAC & Associates, noted a 30-point decline in the differential between reps quoting more and quoting less 2Q vs. 1Q-21 (though at 51, it still is very positive). “The expectation is that future activity will start to taper….” He went on to add, “However, it will take some time for the demand for foodservice products to stabilize as long lead times and escalating prices over-stimulate advance purchasing. Eventually, supply will catch up with demand.”

I might also note that the reps’ sales still have a long way to go. They dropped 30.4% 2Q-20. I’ll do the math for you: A dollar of sales 2Q-19 was shy of 83 cents 2Q-21.

Market Trends/E&S Market Trends   

The National Restaurant Assn.’s Restaurant Performance Index fell slightly overall, though it remains close to the record level it hit in April. But the numbers that should strike both hope and fear in the hearts of foodservice E&S folks are the RPI’s two capital spending indicators. Both hit record levels in the July survey conducted during August.

The marker that tracks survey respondents who made a capital buy in the past three months reached 105.7, exceeding the 105.2 hit back in October 2015, as the impacts of the dramatic fall in gasoline prices took hold. The measure of those who plan to make a capital buy the next six months reached 105.6, exceeding the previous record of 104.9 just in April this year. Before that, the highest reading was 104.2 January 2004, as the industry emerged from the Tech Bubble and 9/11 recessions. Respondents who made a buy in the past three months reached 76%, while 78% plan to make a cap-ex purchase, both records.

If there was a discouraging note in the most recent survey, it was a big 3.4 point drop in the outlook for business conditions during the next six month, though at 101.2, it remained well into expansion territory. The indices for future same-store sales and staffing also fell. NRA: RPI 07-21

I don’t know of a single person in the foodservice business that expected either restaurant sales or demand for E&S to explode the way it has. The problem isn’t convincing operators to buy, it’s getting them their stuff. It’s little comfort to know we’re not the only industry going through this.

Market Trends/Operator Trends, E&S Market Trends

The number of jobs at “eating and drinking places” fell 41,500 even as other hospitality segments saw growth in August, according to the latest statistics on employment from the Bureau of Labor Statistics. The National Restaurant Assn.’s monthly report characterized the decline, the first since December, as “additional evidence the road to a full employment recovery will be rocky.” Restaurant employment remains about a million jobs short of pre-pandemic levels, down about 8%.

Job totals in other leisure and hospitality segments, led by a 30,000-job gain in “amusements, gambling and recreation,” rose, offsetting exactly the number of restaurant jobs lost. NRA: FS Jobs Declined In August; RH: NRA Research Shows Restaurant Jobs Gap; BLS: Jobs 08-21; WSJ/RTE: Special Jobs Report 08-21  


The decline comes as the Delta variation of Covid drives the fourth surge in the US, though part of issue in foodservice may be the unavailability of workers. A new study from Black Box Intelligence and Snagajob found about 15% of former restaurant hourly employees have left the industry for other jobs. Rest. Dive: Why Restaurant Workers Aren't Coming Back; Black Box:/Snagajob: Survey Of Hourly Restaurant Workers 

Both major indexes of consumer confidence and expectations for August also fell, as the Delta surge, the ending of extended unemployment benefits and the rapid run-up in consumer prices combined to drive down the indicators. The University of Michigan’s Consumer Sentiment Index fell by the largest percentage in a decade. The group’s Expectations Index dropped by a whopping 17.6% as the outlook for personal financial prospects in the year ahead fell to a level not seen since the Great Recession. The Conference Board’s consumer indexes also fell dramatically. UM: Consumer Sentiment; Conference Board: Consumer Confidence

Richard Curtin, the UM Surveys of Consumers chief economist, wrote, “The extraordinary falloff in sentiment also reflects an emotional response, from the dashed hopes that the pandemic would soon end and lives could return to normal.”

The Black Box/Snagajob survey is very revealing. As many have written, the long-term restrictions on restaurant jobs led many of those previously employed to shift to other segments. And given the demand for workers in other segments, many found a better work environment, benefits and higher pay.

Market Trends/Economic Trends, Operator Trends

A couple stories in the Wall Street Journal provide good overviews of how the pandemic surge is impeding the economic recovery in the US.

The first looks at how the Delta surge is affecting the economic recovery more than many economists expected. It notes the drop in consumer sentiment, the restaurant job numbers, the delay of major companies reopening their offices, a slowdown in tourism and other factors. WSJ: Delta Variant Slowing Economy

Another WSJ article shows that states that returned to classrooms earliest, especially in the South where mask mandates are lax or banned, are seeing a surge of cases in children. The outbreaks are leading to widespread school re-closings. Unvaccinated teachers not wearing masks can also be a problem. WSJ: Schools That Opened Earliest Have Largest Covid Outbreaks

It was widely reported this week that a number of unvaccinated teachers in Florida have died from Covid.

Market Trends/Economic Trends, Operator Trends

The National Restaurant Assn. released a new “State of the Restaurant Industry” report that looks at a number of issues that have developed in the business since the group dropped its annual report and forecast back in February. A lot has happened since then. The group raised its forecast of nominal sales growth to 19.7% and the deflated forecast, assuming 4% menu-price inflation, to 15.7%. The February forecast was for 11% nominal growth with a 7.5% real change.

The report also covers changes in the employment picture, more data on the growth of off-premise business and other key trends. The free report can be found here: NRA: Mid-Year State Of The Industry

In other NRA news, the group announced Pres. and CEO Tom Bené, the former CEO of Sysco, will step down. He’ll return to distribution as the CEO of alcohol beverage distributor Breakthru Beverage Group. NRA CFO and Chief People Officer Martin Irby will take over as interim CEO as the board sets up a task force to search for a new CEO. NRA: Assn. Leadership Transition; NRN: Tom Bene To Step Down AS NRA President

Bené’s departure seems friendly. Everyone made nice noises. “We appreciate Tom’s leadership and commitment to the industry during this difficult time,” said NRA Board Chair Brian Casey. Casey owns the Oak Hill Tavern and Company Picnic Company.   

Market Trends/Operator Trends; Associations

Three senior level equipment company executive appointments crossed our desk in the past week:
 

   --Rational AG announced that its UK Managing Director Simon Lohse will move to the US take over as exec. vp of Rational North America. He will also serve as president of Rational US. He has been at Rational in the UK since 2016. He previously held a number of positions at ITW’s UK operations including MD of Hobart Service. In North America, Lohse will oversee strategy and operations for the US, Mexico and Canada. Rational: Simon Lohse To Head Rational N.A.

We knew Lohse was coming to America back in June. Our friends at Foodservice Equipment Journal did an interview with Lohse then. You can see that article here: FEJ: Rational's Simon Lohse To Head To North America

   --Hoshizaki America named industry veteran Stephanie Wall vp regional sales. Wall will oversee the sales team throughout the US and Canada. “With the addition of Stephanie to our team, we further advance our strategy to drive share gain and growth through the acquisition of new customers and channel optimization,” said Hoshizaki America Pres. Chris Karssiens.

Wall previously did a four-year stint as a regional sales manager of Hoshizaki. She has also served Ice-O-Matic/Ali as a regional manager, and has been a manufacturers’ rep between factory gigs.

   --Wood Stone has named Paul Humphreys vp of innovation and strategic marketing. He will be responsible for marketing, product management and culinary functions. He has a diverse background in executive roles including as a president and owner of a pallet recycling company, and in sales, product management and finance roles for technology companies. “Paul brings extensive strategic marketing, product innovation and product management to our organization,” said Wood Stone Pres. & CEO Chris Trout.  Wood Stone: Hires New Marketing Chief

E&S Companies/Manufacturers; People

Futures prices for aluminum, which were already at levels not seen since 2011, jumped sharply this week as a coup in Guinea sparked fears of supply disruptions. Guinea, in West Africa, is the third largest producer of bauxite, behind China and Australia, and holds the world’s largest reserves of aluminum’s base ore. Forbes: Guinea Coup Gooses Aluminum Prices

Aluminum prices were already nearing record levels. The surge has been concerning China, which, while it mines and smelts the metal, also is one of the world’s largest consumers of the commodity. Metal Miner: Aluminum Prices Rise In Spite of China's Efforts

Do you ever feel the commodity price gods are angry at us?

Market Trends/Commodity & E&S Pricing Trends