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U.S. factory shipments of commercial refrigeration equipment to reach $4.8 billion in 1995.

With domestic demand spurred by an expanding economy and the phasing out of chloroflourocarbons (CFCs), and the export market surging, the commercial refrigeration equipment market is a growing sector of the U.S. economy.

A number of factors have converged to make commercial refrigeration equipment a growing sector of the U.S. economy after a quarter-century of relative maturity, according to the SBI Market Profile: Commercial Refrigeration Equipment, a new report published by the New York City research firm Specialists in Business Information.

Domestic demand has been spurred by lower interest rates and the general recovery of the economy. An important aspect of the expanding economy has been an increase in business investments and a corresponding upturn in nonresidential construction activity. During 1995, a 19.8% increase in nonresidential construction permits has been led by higher new construction rates for gasoline stations, educational buildings, amusement buildings, and retail stores - all traditionally significant consumers of commercial refrigeration equipment.

Domestic sales of display cabinets and cases, prefabricated sectional coolers, beverage dispensing equipment, and specialty commercial refrigerators and freezers increased at a 15.5% compound annual rate between 1992 and 1995. During this period, manufacturers of these products increased their emphasis on domestic sales of reach-in refrigerators and vertical display cabinets that meet the proliferation of codes relating to temperature control and food handling.

In addition, retail foodservice operators and foodservice establishments are increasing expenditures on retrofit and replacement equipment in response to the ban on CFC refrigerants. As a result, replacement sales, which traditionally have represented some 55% of total U.S. demand, are outpacing overall industry growth. The growth in replacement markets has been especially beneficial to manufacturers and marketers of ice-making machines. SBI estimates that U.S. market sales increased at a 20.0% compound annual growth rate between 1992 and 1995.

The growth of nontraditional fast-food and casual dining restaurant chains is spurring both the ice-making and the beverage cooling/dispensing markets. Growth has been especially strong for nonmechanically operated dispensers, with U.S. shipments increasing at a 12.2% compound annual growth rate between 1987 and 1995, compared to only a 0.7% annual gain for mechanically operated units.

Perhaps the most notable factor leading to a rebound in the overall industry, however, has been export shipments. SBI estimates that total U.S. exports of commercial refrigeration equipment will have risen during 1995 to 18.5% of the domestic supply, compared to 14.5% in 1991. Major competitors are also expanding overseas operations and entering joint ventures to exploit foodservice market opportunities in Asia, Latin America, and the recovering European market. Manufacturers of commercial refrigeration components received the strongest boost from the international market, with exports increasing at a 42.3% compound annual growth rate between 1991 and 1995.

SBI estimates that exports will reach $497 million by 1995, representing 25.7% of total U.S. factory shipments. The strongest gains have been for hermetic centrifugal liquid-chilling refrigerating units and reciprocating liquid-chilling units. Domestic and global opportunities have also expanded sharply for motor vehicle refrigeration systems, making this the fasting-growing segment of the refrigeration component business.

The factors that have transformed commercial equipment into a growth industry - the expanding base of U.S. customers, a healthy replacement market, and booming export sales should remain in force over the next decade. SBI forecasts that U.S. shipments will increase at a 7.0% compound annual growth rate over this period, climbing to $9.4 billion by 2005. Such sales will correspond to 0.079% of the gross domestic product - the industry's highest share since the late 1960s.
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Publication:Frozen Food Digest
Date:Feb 1, 1996
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