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Projecting $267.2 billion in food service sales in 1993.

Forecasting improved but still modest growth, the National Restaurant Association is projecting $267.2 billion in foodservice industry sales in 1993, an increase of 4.8 percent over 1992, when the industry recorded $254.9 billion in sales.

Real sales, adjusted for inflation, are projected to advance 1.7 percent, an encouraging improvement over last year's 1.2 percent real increase. Still, the advance does not match the real gains achieved during the late 1970s and early to mid-eighties.

Rather the 1993 figure reflects a strengthening, though still weak, national economy that will be in transition from recovery to a growth phase, association economists agree.

"The economic scenario for the coming year and probably for the rest of the decade will be conditioned by the relatively modest growth of the American population, labor force and economy," said Dick Marriott, the association's president.

"Restaurateurs can no longer afford to wait for better times," Marriott continued, "especially since all demographic and economic trends suggest a downshifting of gears to a slower-growth environment."

Nevertheless, the foodservice leader was quick to add, this "slower-growth" period still offers ample opportunities for innovative foodservice operators and suppliers. The astonishing growth of the takeout market--even at tableservice restaurants--is a prime example of how the industry has utilized creative solutions, from self-service kiosks to home delivery, to satisfy pressing consumer demand.

Success in the foodservice arena will hinge on integrating the right concept, skillful execution, timely service and a consistent product with a sharper focus on the consumer, industry experts agree.

Although consumers believe restaurants are doing a good job meeting their expectations, restaurateurs say consumers in the '90s will be looking for something more, according to Marriott.

"To be successful from here on, restaurateurs must have a concept that is upbeat, one that take people's minds off their economic concerns," he observed. "Solid execution and offering a good value are no longer enough."

The 1993 forecast for the eating and drinking place segment of the foodservice industry is as follows:

Sales at tableservice restaurants and lunchrooms are projected to top $83.5 billion in 1993-a 4.0 percent advance from 1992, or 0.8 percent i n real terms. This follows a real gain of just 0.1 percent in 1992 and a decrease, when adjusted for inflation, of 1.1 percent in 1991.

Continued, albeit moderate, growth in this category is expected since food prepared away from home is an important component of consumers' lifestyles. Competition will remain intense, particularly at chain dinnerhouses, which are expanding at a rate above the industry average and are well positioned to continue their aggressive growth in 1993. While some independent restaurateurs are finding it difficult to expand their businesses, chains with financial resources are taking advantage of low real estate prices and interest rates to buy up good sites.

Industry experts point out that an important attribute offered by tableservice restaurants is social interaction.

"Because tableservice establishments fulfill this basic need to socialize with friends and family in an upbeat, lively atmosphere, the convenience aspects of takeout are not likely to overwhelm tableservice over the long term," commented Marriott.

Fast food (limited menu) restaurants will be one of the brighter spots in the foodservice industry in 1993. Sales are expected to jump 6.1 percent to $80.2 billion, an increase of 3.1 percent after adjusting for inflation. After no real growth in 1991, many fast food chains launched special value menus. As a result, sales in 1992 rebounded 5.2%, or 3.2 percent in real terms.

Fast food restaurants clearly were the beneficiaries of consumers' tendency to "trade down" during slower economic times in order to maintain their frequency of foodservice patronage. With slightly stronger economic growth anticipated in the coming year, consumers can be expected to trade up" occasionally from fast food concepts, dampening this category's growth rates. In addition, fast feeders are facing compatition from supermarket deli counters and convenience stores.

As a result, fast food concepts are beginning to view themselves as players in a global market, and many are expanding aggressively overseas. Another avenue for growth in a maturing fast food market is to locate units in nontraditional locations such as office parks and schools. Experience has shown that branded food items can generate two to four times the sales volume of generic products since consumers prefer purchasing brands they know and trust.

Catering is one area of commercial foodservice that continues to show strong growth. In 1993, social caterers are forecast to post the fastest growth among the eating place segment, with sales projected to reach $2.7 billion, an increase of 7.0 percent (3.9 percent in real terms).

Despite the nation's economic woes, catering remains a strong category because of the special nature of catered events. The National Restaurant Association's off-premises study, conducted last May, revealed that 42 percent of consumers reported eating a meal at a catered event at an office or some other public place during the past 12 months. Almost three out of 10 consumers reported eating a meal at an event catered in a home within the past year.

Sales for bars and taverns are projected to reach $9.3 billion in 1993, with sales in this category expected to increase 1.1 percent. After adjusting for inflation, sales are expected to decrease 3.2 percent.

After a brief respite, the social and regulatory pressures to reduce alcohol consumption have reemerged. Declines in the number of bars and taverns should be somewhat offset by the continued popularity of sports bars. Prices of alcoholic beverages are also increasing at a faster pace than menu prices, primarily due to higher taxes.

Real sales at commercial cafeterias are also expected to decline next year. Their projected $4.6 billion in sales represents a 2.0 percent increase over last year, but is actually a 1.1 percent decrease when adjusted for inflation.

The major hurdle for cafeterias is their older customer base. Due to their fixed income, older consumers generally have a lower level of consumer confidence, and their reaction to disturbing economic news tends to be negative. Also, cafeterias have done little marketing to broaden their appeal and customer base. However, industry analysts expect this eating place category to begin reaping rewards after next year, as cafeterias start to position themselves against the competition based on variety of food offered and value.

Finally, sales at ice cream and frozen-custard stands (also includes frozen yogurt outlets) during 1993 are expected to post a healthy gain of 6.5 percent, or 3.5 percent real growth Customer counts at these establishments have increased as more competitive pricing has lured consumers into indulging in affordable little luxuries.
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Publication:Frozen Food Digest
Date:Feb 1, 1993
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