Hot Off the Press
‘Tis the season to be jolly, but many suppliers to the foodservice industry might not be looking toward the New Year, says editor Dan Malovany.
‘Tis the season to be jolly, but many suppliers to the foodservice industry might not be looking toward the New Year.
That’s because business at chains ranging from
casual-dining restaurants to fine-dining establishments have seen business
slump in recent months as consumers spend less or reduce the total amount that
they’re spending by eliminating desserts, ordering more affordable menu options
or simply cutting out the number of times they eat out each month.
The exception may be quick service chains, which are benefitting as Americans seek more affordable options. In fact, Chicago-based Mintel’s Menu Insights database shows more restaurants promoting “value” on the menu. Nobody seems immune to the “downturn.”
The trick, however, is maintaining the same quality at what consumers believe is a reasonable price. Mintel notes the “$5 phenomenon” where QSR operators like Subway offer footlong subs. Quizno’s sells Large Deli Favorites and Pizza Hut promotes Pizza Mia Pizzas for that price, but to get that deal consumers need to order three or more pizzas.
Even steak houses are peddling deals. Ruth’s Chris, for instance now offers an “Economy Proof” meal with soup, salad, an entrée and side dish from a limited menu of items for $35.95. However, if you look online, as my family has done, you can find coupons from a whole slew of upscale restaurant chains that provide a great value with a wider selection of items along with a bottle of wine or dessert included, for about $75 or so. Yeah, they ain’t giving it away, but these promotions might lure consumers who otherwise might have trade down.
As foodservice chains offer more value options, they’re likely going to pressure their bread and dessert suppliers to trim prices, especially since fuel and commodity prices have come down to reasonable levels. In 2009, volume may trump price as everyone in the foodservice industry looks for that competitive edge.
Even the chefs working at high-end restaurants and hoity-toity hotel chains are searching for ways to reduce the amount of bread they offer for free at dinnertime. In some cases, bakers report, restaurant operators are complaining that their patrons fill up on the Old World and artisan breads and rolls, then skip appetizers or dessert. Or worse, they’re just ordering appetizers and desserts and skipping the highly profitable main entrée. Ya’ gotta love it. Who says you can’t get something for free?
Certainly, the foodservice channel is struggling. According to published reports sourcing U.S. Bureau of Labor Statistics, the industry cut jobs for an “unprecedented” fifth consecutive time. Some store sales continue to slide for the industry as a whole. Quite honestly, for many establishments, business just sucks.
Pessimism abounds among operators. Layoffs in the manufacturing arena have pummeled the “business and industry” segment of the foodservice industry. Companies across the nation have eliminated or cut back on holiday parties. When the waiter at one of our local mid-level chains noted that they’re laying off busboys, geez, it has gotta be tough.
Uh, don’t get him talking at all about how Americans are tipping less. I thought he was going to spit in my soup.
I expect January and February might be most brutal times for many companies who serve the foodservice industry as Americans continue to cut back on eating out and justify it as they’re just finding ways to eat healthier and lose weight as a part of their New Year’s resolutions.
Yeah, the Subways of the world may thrive, but it might be because of the value meals they offer. And, knowing that most folks talk about dieting instead of actually doing it, some consumers may opt for two Whoppers for $4 at Burger King instead of going to T.G.I. Fridays.
Traditionally, the restaurant business is slow at this time of year, and it’s likely going to be worse than anything people have seen in a long time. Ironically, the good news is for the frozen pizza and dessert manufacturers. A slow economy has resulted in an increase in sales as consumers stay home a little more often and treat themselves with restaurant-style desserts that cost only a fraction of what it would cost to go out.
I wish everyone a Happy New Year. It has to be better than the start of 2008. Look at it this way. Wheat and corn costs have dropped and energy and fuel prices seem to have leveled off at more reasonable levels.
Which would you rather take -- skyrocketing commodity and fuel costs or an economy sliding into a deep recession?
If this were a poker game, I’d swear someone left the joker in the deck.
Dan Malovany, editor
Editor’s Note: For everyone’s past online-only columns, click on the “Our Views” section of our home page on www.snackandbakery.com. For our past columns, including those of Marina Mayer, managing editor, and Jeff Dearduff, our award-winning columnist, check out our archives or just type in their names in the search vehicle.