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Gradual increase in foodservice sales expected for 1992.

Forecasting improved but modest growth, the National Restaurant Association is projecting $262.0 billion in foodservice industry sales in 1992, an increase of 5.6 percent over 1991 projections. Real sales, adjusted for inflation, are projected to advance 1.8 percent.

The 1992 figure, higher than the 0.5 percent real gain in 1991, reflects an anticipated modest improvement in the nation's economy. Still, the advance does not match the real gains achieved during the late 1970s and the early to mid-eighties.

"No question about it, the go-go years are a thing of the past," acknowledged John Farquharson, association president, referring to the period when overall economic growth was higher and the industry was in a less mature phase.

Nevertheless, association statistics show that throughout the past year customers have maintained frequency of eating and ordering out, although they have reduced the amount of money spent on each occasion. "This recession has demonstrated that eating out is firmly entrenched in contemporary lifestyles," said Farquharson. "Consumers are less willing to sacrifice that option now than they were during previous recessions."

In addition, a recent Gallup survey commissioned by the National Restaurant Association indicates that while 73 percent of adults are eating out as often as they would like, a pent-up desire to eat out more frequently exists among 27 percent of adults. As incomes rise during the coming year, forecasters believe this pent-up demand for food away from home--particularly for dinners out--will reassert itself.

Farquharson pointed out that the industry has struggled to maintain customer traffic by responding to the needs of financially-pinched patrons through value pricing and promotions. Association research conducted in 1991 confirms that the majority of consumers feel that restaurant meals meet or exceed their value expectations.

The industry's recent track record indicates that foodservice may be less sensitive to cyclical contractions than many other industries. Also, as consumers reined in their purchases of large durable goods during the past year, foodservice expenditures actually may have been assisted because there were fewer fixed charges against household incomes to limit the amount of cash on hand.

Nevertheless, one unique characteristic of the 1990-91 recession was its dramatic effect on professional, higher-income, white-collar workers--one of the primary foodservice markets. Despite an expected gradual recovery of consumer confidence in 1992, restaurant operators still will face the challenge of contending with their patrons enduring a period of continuing economic anxieties.

The 1992 forecast for the eating and drinking-place segment of the foodservice industry is as follows:

Sales at restaurants and lunchrooms are expected to reach $83.2 billion in 1992--a 5.1 percent advance from 1991, or 1.3 percent in real terms.

Although most Americans will be motivated to maintain their eating-out/takeout frequency in order to preserve their standard of living, today's value-driven consumer makes the higher-check portion of the restaurants-and-lunchrooms sector especially vulnerable

The National Restaurant Association predicts that competition for cash-conscious customers will remain intense. Chain dinner houses, in particular, are adding units at a rate above the industry average and are likely to show aggressive growth in the next few years.

Fast food (limited menu restaurant) sales are expected to climb 6.4 percent in 1992 to $78.3 billion, an increase of 2.6 percent when adjusted for inflation.

Convenience, quick service and perceived value for the price continue to be the fundamental forces behind fast food expansion. Fast food operators have responded to economic conditions by introducing lower everyday prices to boost value and more efficient production systems for better, faster service.

Despite the fact that fast food's growth rate is slower than it was in the 1980s due to a more mature market and recent competition from takeout areas in supermarkets, some segments in the industry (such as Mexican and oriental establishments) continue to post double-digit growth.

The long-term outlook is for increased expansion in international markets and an intensified effort to open units in nontraditional locations.

Commercial cafeterias can expect to see sales advance 5.4 percent to $4.8 billion in 1992--a 1.6 percent increase in real terms. Cafeterias are well positioned to take advantage of consumers' desire for food variety and value for the price.

Next year's modest economic recovery should signify a rise in frequency of visits by the typical cafeteria patron, generally an older individual with a lower level of consumer confidence. Also, major cafeteria chains are wooing a wider base of customers with upgraded facilities, enhanced takeout services and value promotions.

Social caterers' sales are projected to climb a healthy 7.3 percent to reach $2.6 billion. Real sales should rise 3.5 percent--the largest gain in the eating-place segment.

Sales at ice cream and frozen custard stands are forecast to reach $2.1 billion, a 3.8 percent gain over 1991. Adjusted for inflation, however, sales are expected to remain flat. Competition from fast food chains selling ice cream and frozen yogurt has cut into sales of this specialty segment.

Bars and taverns' sales will climb 2.1 percent, reaching $8.7 billion, in 1992. With inflation adjustment, however, real sales actually will be down 2.7 percent.

Despite the popularity of sports bars, social and regulatory pressure to reduce alcoholic beverage consumption has had a serious impact on sales at bars and taverns. Also, tax increases at all levels means that alcoholic beverage prices are increasing at a faster pace then menu prices (see below)--a fact that has not gone unnoticed by today's wary consumer.

Of particular note for 1992 is the continuing low growth in menu price inflation. Menu prices are expected to advance 3.8 percent next year, up slightly from the 3.4 percent 1991 increase. Menu price inflation in 1991 was at its lowest annual rate since 1965, and consumer resistance to price increases, intense industry competition and declining wholesale food prices will continue to dampen inflation in this area.

The National Restaurant Association's 1992 Foodservice Industry Forecast is available to association members for $10 and to non-members for $20. Checks or money orders should be sent to the National Restaurant Association, 1200 Seventeenth St., N.W., Washington, DC 20036. Credit card orders may be placed over the phone by calling the Information Services department at 800-424-5156 or 202-331-5900.
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Publication:Frozen Food Digest
Article Type:Industry Overview
Date:Feb 1, 1992
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