The six publicly reporting foodservice equipment companies we follow posted some truly amazing numbers 2Q-21, as they rebounded from the depths of the Covid-19 pandemic last year. Our forecasting partner John Muldowney, principal at Clarity M&A, has provided us with his quarterly compilation and analysis of the results. Combined sales of the six companies—Middleby, Welbilt, ITW Food Equipment Group North America, Unified Brands/Dover, Rational Americas, and Electrolux Professional Americas—rose 75.4%. Sales for the first half of 2021 were 29.8% higher than first half 2020.

The biggest gains by far were reported by Welbilt (Welbilt: 2Q-21 Results), up 92% 2Q-21 vs 2Q-20, and Middleby Foodservice (Middleby: 2Q-21 Results) 90.2%. But that’s because the two companies had the largest declines during 2Q last year, as their big chain customers from McDonald’s on down essentially shut down capital spending.

The four other companies in our tally, all more spec- than chain-oriented, saw smaller gains although Electrolux Professional Americas (Electrolux Professional: Interim Report 1H-21) was up 79% on the smallest dollar base. ITW/FEG (ITW: 2Q-21 Results) posted a 45% 2Q gain, Unified Brands (Dover: 2Q-21 Results) saw an estimated 30% increase and Rational (Rational AG: 1H-21 Results) sales in North America rose 22%.

As John said in his overall analysis, “E&S (is) rising to support robust (operator purchasing) rebound.” But we both also want to point out these are funny numbers, or let’s call them by the more “sophisticated” term, anomalies. If you compare first half 2021 results for the companies versus 1H-19, only Middleby is ahead. And that’s purely the result of acquisitions, such as the Standex Foodservice cooking group, now included in the total. Welbilt is still 5.8% behind, ITW/FEG 7.9% off 1H-19, Unified Brands down 17.1% and Rational running 26.1% lower than the period in 2019. Now, there are chain rollouts and big spec jobs and other factors involved here, but the reality is these companies have not fully recovered from the pandemic, in spite of the strong 2Q-21 performances of these five (Electrolux Pro was just splitting off from Electrolux AB so we don’t have clear 2019 numbers for a comparison).

E&S Companies/Manufacturers; Market Trends/E&S Market Trends

St. Paul, Minn.-based Smart Care Equipment Solutions, the national commercial equipment service and maintenance firm, announced Aug. 25 that it has acquired Schenectady, N.Y.-based, multi-branch Horizon Bradco. The company has three divisions: Horizon Bradco, Allied Mechanical Services and 5-Star Refrigeration. The company’s primary focus is fixing and maintaining equipment in retail outlets such as supermarkets, c-stores and bakeries, but it also has an active foodservice equipment practice. It covers the entire Eats Coast from Maine to Florida with branches in N.Y., Massachusetts, Connecticut and Florida.

“Horizon Bradco is a tremendous acquisition for the Smart Care portfolio,” said Horizon Bradco CEO Mike Jewett. “We are excited to partner with a larger organization and look forward to leveraging Smart Care’s scale, capabilities and best practices….” FER: Smart Care Buys Horizon Bradco; Smart Care: Announcing Acquisition Of Horizon Bradco; Horizon Bradco: Locations, Divisions, Etc.

This is Smart Care’s ninth acquisition since separating from Ecolab in late 2016, early 2017. The company also announced three acquisitions in June. Smart Care now has more than 600 technicians working across the country.

I cite Jewett above, rather than Smart Care CEO Bill Emeroy, who praised his new company’s dedication “to exceeding customer expectations,” because it closely echoes what Bob Hund of HCI said is a key reason smaller agencies are joining up the larger companies such as Tech-24, Smart Care and Parts Town. See my commentary above.

E&S Companies/Service & Parts; Deals & M&A

There was some good news in the August release of July wholesale food prices from the Bureau of Labor Statistics, and more good news from the US Dept. of Agriculture. Prices across all three stages of demand in the monthly Producer Price Index for July fell, per BLS. The “All Foods” wholesales food index was down 2.7% month over month, according to the National Restaurant Assn.’s monthly report of wholesale price trends. While wholesale food prices remain 8.1% higher over the 12 months ended July 2021, it was the first month-over-month decline this year. Nearly all the major protein groups registered declines in July except processed turkeys and fresh fish. Beef and veal prices fell 11.1% during the month and pork prices were down 8.1%. BLS: PPI; NRA Trendmapper: Wholesale Food Prices Fell In July (requires subscription)

Separately, the US Dept. of Agriculture released one of their periodic forecasts of whole food price trends. And while they expect prices to remain quite elevated this year, they forecast prices will moderate strongly in 2022 (see table). NRA Trendmapper: Wholesale Food Prices Likely To Remain Elevated (requires subscription)

Unfortunately, the good food-price news does not extend to menu and retail food prices at the consumer level. Menu prices shot up 0.8% month-over-month in July, the biggest gain according to NRA since 1982. And menu prices are now 4.6% higher than at this time last year, the largest increase since 2009. Menu prices have risen 0.6%, 0.7% and 0.8% the last three months, as both QSR and full-service operators aggressively raise their prices. QSR prices are now a remarkable 6.6% higher than a year ago, as QSR operators raised prices a full percentage point in July. Full-service menu prices were up 4.3% for the 12 months, as operators raised prices 0.6% in July.

Grocery stores are also responding to the run-ups in wholesale food prices, raising their prices 0.8% in June and 0.7% in July. Their prices are now 2.6% higher than last July’s very elevated prices. BLS: CPI; NRA Trendmapper: Menu Prices Still Rising (requires subscription)

We can just hope that the USDA forecasts of moderating food prices next year come to pass. The menu-price gains are truly remarkable. Just goes to show the dynamics of supply and demand really do apply.

During my month off, there has been a bunch of E&S company personnel announcements, a manufacturer expansion, plus one of my favorite dealers—I do have favorites—is celebrating its 90^th anniversary.
 

   --Sandy Hoyt, who first joined TableCraft Products, Gurnee, Ill., as a West Coast regional in 2010, has been promoted to vp of sales effective Sept. 1. “Sandy has represented the company tremendously in her time with TableCraft,” said Pres. Jeff Tait. FER: Hoyt Named VP Sales At TableCraft

   --Foldcraft’s Plymold division announced that John Woodhead has been named vp of sales and marketing at the Kenyon, Minn.-based employee-owned maker of commercial furniture and fixtures. Woodhead has spent more than 30 years in executive roles with companies mostly in the healthcare and personal care markets. He will be responsible for efforts to “align sales and marketing strategies to drive new business development and growth,” said the company release announcing his appointment. Ryan Dahnert, Plymold CEO, said Woodhead’s “proven sales experience” and “his success in business development, client relations and overall planning will be a valuable addition to our company.” Plymold: Woodhead Named VP Sales

   --Edward Don & Co. Woodridge, Ill., has hired Elias C. Tavarez as its new CFO. He succeeds longtime CFO Jim Jones, who remains in his role as COO and a member of the Don board. Tavarez has extensive experience in financial roles for food distributors and PepsiCo. He was CFO at Harvest Sherwood Food Distributors in Detroit before joining Don. “His deep and extensive experience in leading financial operations in a fast-paced distribution business will allow us to continue to create value for the company and our customers,” said Don CEO Steve Don. From a company release.

   --Don also has named Smith & Greene sales veteran Phil Blas as regional sales manager for the West Coast. Blas has served in sales roles at Don division Smith & Greene for 12 years. From a company release.

   --Ali Group company Carpigiani, based in High Point, N.C., announced it appointed Corey Burns as its director of after-sales service. Burns is a well-known manufacturer service manager veteran who has worked at Standex Foodservice, Ali’s Burlodge, as well as Welbilt, TriMark USA, MVP Group and Caspers Service. “Corey brings a wealth of knowledge and experience in after-sales management and building support systems to improve customer satisfaction,” said Carpigiani North America Pres. Penny Klinger. From a company release.

   --Krowne Metal, the Wayne, N.J.-based manufacturer of bar equipment, plumbing fixtures and other fabrication for the foodservice industry, has added a third facility and also named a new regional sales manager. The company has purchased a third facility in Wayne to add to its capacity, which now covers more than 250,000 sq.ft. It also announced it named Tundra/FMP sales vet Jon Rodriquez as western regional sales manager for its plumbing division. He will be based in Colorado.  FEDA: Krowne Adds New Facility; Krowne Metal  

   --And by no means least you really must see the package Federal Supply USA, the corrections foodservice-oriented dealer based in Waukegan, Ill. put together for its 90^th anniversary. Federal Supply USA.  The company was founded in Greektown in Chicago in 1931 and has a truly amazing history which you can see in the YouTube video they put together to recount its transitions over the years. The package also included a “three-dimensional” mailing to a select few, including myself, with a box of goodies and the QR code that allows you to access the YouTube video. You can also see an overview here: PRIDE: Federal Supply Celebrates It's 90th Anniversary

Full disclosure: Federal owner Demetrios Selevredes II is one of my very best friends in this business. We’ve known each other for almost 40 years. Which I guess means I’ve known him almost half of Federal’s history. Our congratulations to him, his daughter Nicole who is now president, son Demetrios III, and all those at Federal.

And can I add that Woodhead is the perfect name for a senior executive at Plymold. Welcome to the industry, John.

E&S Companies/Manufacturers, Dealers; People

The parts and service E&S news just keep coming. Among other things we noted during August:

   --Halton Americas announced Aug. 17 that it has acquired South Bend, Ind.-based Nelbud Services Group, a provider of fire protection, ventilation cleaning, grease trap and hood system repair services. The company has more than 20 locations, mostly based in the Midwest and East, but stretching from Las Vegas to Boston. The acquisition vertically integrates OEM ventilation maker Halton, based in the Americas in Scottsville, Ky. Halton’s global headquarters is in Kausala, Finland. FER: Halton Acquires Nelbud Services Group; PR Newswire: Halton Americas Buys Nelbud Services Group; Nelbud

This is a big deal not only because Nelbud is a very significant player in this space, but because of the strategic move by Halton Americas into the service side of the business.

   --AllPoints, the Mt. Prospect, Ill.-based parts distributor, announced a partnership Aug. 12 with Albertson, N.Y. and New York Citi-based EquipID to enable its users the capability to order replacement parts with a single click on the EquipID app. The EquipID platform provides supportive content and service validation so operators can maintain digital logbooks of equipment repair history and info using an NFC reader available on any smartphone. AllPoints is a division of Diversified Foodservice Supply

“With this EquipID partnership…we’re…providing the service-agency industry with one more innovation to streamline operations,” said AllPoints Pres. Tom Pendry. “I’m excited by the strength of AllPoints experience and our shared vision to transform the restaurant supply industry,” said EquipID CEO Steve Gottlieb. From an AllPoints company release.

In addition to Gottlieb, who has a long history of facilities management technology experience and entrepreneurship, EquipID’s senior management includes Carolyn Roberts, who many of you may remember as a senior executive at Chipotle with a broad portfolio of responsibilities including procurement and facilities. Carolyn has served three terms on the Restaurant Facilities Management Assn.’s board. EquipID

   --Component Hardware Group is leaving its original home in Lakewood, N.J., after 40 years, having outgrown its facility there, and moving to a new state-of-the-art distribution and headquarters facility in Columbus, Ohio. The new warehouse becomes operational Sept. 1.

“The addition of this more geographically central location will reduce delivery times for a greater percentage of our customer base and will give Component Hardware the much-needed additional warehouse space to address the return of demand to our industry and our growing customer base,” said CHG CEP and Pres. Partha Biswas. Catering Insight USA: Component Hardware Group Moves

Wow, there’s a lot going on.

E&S Companies/Manufacturers, Service & Parts; Deals & M&A; Technology

Datassential, the Chicago-based foodservice research firm, has revised its forecast for foodservice operator spending for the years 2021 through 2023. The firm provides the forecast through the sponsorship of the Int’l. Foodservice Manufacturers’ Assn.

The new forecast estimates the foodservice operator market lost almost $200 billion of its annual volume during the pandemic, falling to $608 billion in 2020 compared to nearly $807 billion in 2019. The decline was nearly 30%. It predicts the market will rebound this year to $701.4 billion, a gain of 10.4%, expand again in 2022 to $771 billion, or another 4.9%, before finally surpassing 2019 totals in 2023. The forecast has 2023 total operator sales at $817 billion, a mere 1% increase over 2022. All the Datassential/IFMA forecasts are made in real terms, deflated by menu price inflation, which is expected to run at an elevated 3%-5%.

As is true of other operator forecasts from Technomic and Pentallect, quick-service, fast-casual and other limited-service concepts are driving the recovery. Full-service and noncommercial segments will continue to recover more slowly. Full details can be found at IFMA: Releases 2022 Operator Forecast; IFMA Scope: Operator Forecasts

The two other major foodservice research firms, Technomic Inc. and Pentallect Inc., both also based in Chicago, also have forecasts for 2021 and 2022 operator sales. Technomic revised its forecast in June and predicts operators will grow sales this year and next quite a bit faster than the Datassential forecasts: 17.8% in 2021 and 7.3% in 2022. Technomic forecasts menu-price inflation of 4% this year and 3% next.

Pentallect is in the process of revising its 2022 forecast, which will be featured during the Ashton Report E&S Market Forecast meeting. Principal Bob Goldin sent us the numbers privately, but asked us not release it yet as the forecast is preliminary. But their 2022 forecast is closer to Technomic’s than Datassential/IFMAs.

Forecasting this market is particularly hard these days, so the disparities are only to be expected. Datassential/IFMA focuses more on food purchases, since IFMA’s members are food processors, and that may restrain their optimism. You can sell the same amount of food and get more for it.

Market Trends/Operator Trends

Lots going on north of the US border. Among the pertinent news for foodservice:

   --Restaurants Canada’s Senior Economist Chris Elliott has revised his forecast for the recovery of the foodservice market in Canada. In RC’s latest “Restaurant Quarterly Forecast,” Elliott now predicts the market will grow to C$63.9 billion in 2021 from C$55.4 billion in the pandemic-crushed 2020, or a nominal gain of 15.3%. Full recovery won’t happen until 2022, when the association expects sales to reach C$80 billion, a 25.2% increase over 2021 and exceeding 2019 sales of C$77 billion. Restaurants Canada: 2Q-21 Foodservice Forecast (requires membership)

   --RC’s forecasts are for nominal growth. But menu prices are also rising rapidly in Canada, as they are in the US. The latest numbers from Statistics Canada report menu prices rose 3.1% in July this year, the strongest gain since January 2019. RC: Canadian Menu Prices Rose 3.1% In July

   --The Government of Canada announced that it will begin allowing fully vaccinated international travelers to enter the country through five more international airports beginning Sept. 7. As a first step, American travelers who can show proof of full vaccination 14 days prior to entry could enter the country beginning Aug. 9. As the press release from the government said: “This preliminary step allows for the Government of Canada to fully operationalize the adjust measures ahead of Sept. 7, 2021, and recognizes the many close ties between Canadian and Americans.” Americans, and others, have not been able to enter Canada for nonessential travel since the beginning of the pandemic in March 2020

International, including American, travelers who could show vaccination and had a compelling reason to enter the country could enter through four airports before this announcement. These new rules apply to “non-essential” travel. The original four airports were in Montréal, Toronto, Calgary and Vancouver. The new directive will add air transport facilities in Halifax, Québec City, Ottawa, Winnipeg and Edmonton.

The US is still not allowing Canadians to enter the US. And I’m wondering whether the US will allow US travelers to Canada to return without a 14-day quarantine. You’d better check before you head north.

Market Trends/Operator Trends, Economic Trends; Regulations; Global

You may notice that I have NOT said much about the fourth wave of the Covid pandemic driven by the surge of infections from the Delta variant. That is because I could write the whole newsletter just about that and I figure you see most of that in the general press. Let me just say that the new surge is suppressing restaurant sales already. QSR: Delta Already Changing Dining Behavior. And this fact led to the National Restaurant Assn. asking Congress for more aid. RB: NRA Petitions Congress With Delta Surging; NRA: Letter To Congress On Financial Dangers To Restaurants. And the surge is also already leading a slowdown in general consumer spending. WSJ: Consumer Spending Slowed July As Incomes Rose; BEA: US Personal Income And Spending 07-21.

But for an article that specifically addresses ways foodservice operators are coping with the surge, check out this about how the 100 largest school districts in the country are trying to figure out just how to reopen safely. What a mess. NYT: Reopening Plans For the 100 Largest School Districts.

And for a view on how two school districts, one the largest in the country and another smaller one in my home town of Evanston, Ill., are coping, see these: FM/CNN: NYC Schools Vax Mandate With No Opt-Out; Evanston RoundTable: K-8 Schools Will Require Staff Vaccinations, With Opt-Out

The impact of the Delta surge, which is turning out to be the second worst of the pandemic, will continue to play out over the next month or two. Can this please, please be the last surge of this pandemic?

Market Trends/Operator Trends; Regulation

Industrial metals prices continue to remain elevated as demand outstrips supply for all four major metals. But within each product category, we are seeing the beginnings of so-called “waffling” of prices. That is, one month they soften, the next they continue rising. From July to August, it was aluminum and copper that saw prices soften, while raw and stainless-steel prices continued rising. These numbers come from MetalMiner. MM: Stainless Demand To Remain High Thru 2022; MM: Raw Steel Prices Continue to Rise

But a report from the Wall Street Journal at the end of August states that aluminum prices are now hitting new highs, while stainless and copper are softening. WSJ: Aluminum Prices Hits Record Highs

The reality is, despite any softening, that metals prices are at least 50% higher than at the depths of the pandemic, and are likely to remain elevated for some time to come. And that means E&S manufacturers will be under pressure to continue to try to raise prices

Market Trends/E&S & Commodity Prices

The ability to move goods around the globe, leading to severe shortages of commodities and components for manufacturers and finished products for consumers, continues. These are just a few of the stories we’ve seen in the past few weeks.

The New York Times had a good overview of how shortages of manufactured components from Asian are restraining American manufacturers. The example applies to high-end bicycle making, but you could easily apply it to a foodservice equipment manufacturer: NYT: Global Shipping Issues As Holidays Approach

MetalMiner also is tracking how freight rates are soaring and congestion at major Chinese ports is restraining the movement of many key components and materials. MM: Global Shipping Market Getting Worse

With ocean-going freight and shipping so constrained, desperate manufacturers are resorting to using air carriers to get them key materials and components. Problem is, international flights are still less than half what they were pre-pandemic and this is leading to air freight rates also rising dramatically. WSJ: Air Freight Numbers Soar

My friend David Wasserman keeps telling me that the logistics problems are not going to even begin to resolve until the middle of 2022.

Market Trends/Economic Trends, E&S Price & Commodity Trends

That’s almost enough for this newsletter! But I would be remiss if I didn’t show the following charts detailing how foodservice retail sales reached another record in July and how foodservice jobs continue to claw back toward pre-pandemic levels. And here are all the reports:

Retail sales: Census Bureau: Retail Sales 07-21; NRA: FS Retail Sales Reached New High In July; CSA: July In-Store Retail Sales

Jobs: BLS: Jobs Report 07-21; NRA: July Restaurant Jobs Report; NRA: 44 States, D.C. Added Jobs In July; WSJ/RTE: 08-06-21 Special Jobs Report

Market Trends/Economic Trends, Operator Trends