The International Foodservice Manufacturers Association (IFMA) delivered its growth forecasts through 2023 in early August. The positive news is that it looks like the foodservice industry is past the worst of the pandemic, but there are still a number of current issues – namely labor and supply chain shortages – along with the Delta variant that will impede more aggressive growth.
The Macro-Indicators Look Much Better in 2021
From a macro-economic standpoint, most indicators are pointing in the right direction. Two of the primary indicators of foodservice vitality is employment growth and disposable personal income – both of which performed well on the latest readings.
The Civilian unemployment rate fell from 11.1% in June 2020, to 5.9% in June 2021 (a slight uptick over May’s 5.8% figure). Disposable personal income – the amount of money left after taxes – was down -0.5%, but a marked improvement over April’s -15.8% drop. Couple this with the economy growing 6.5% in the second quarter, and there are plenty of positive signs pointing to a resurgence in foodservice.
Inflation and the Delta Variant
On August 11, the Bureau of Labor Statistics announced food-away-from-home (FAFH) inflation (or menu prices) rose by 4.6% percent in July versus a year ago and “core” inflation (excluding gas and food) rose by 5.6%. With the industry-wide labor shortage, operators have begun to pass the cost of higher wages onto consumers.
Only two months ago, mask bans were lifted across the country, only to find ourselves in a situation where the Delta variant is threatening the “re-reopening” of America’s eateries. If Americans reconsider dining out and/or make any other lifestyle changes due to concerns for the Delta variant, “in the near future, it would take the edge off inflation concerns because it would mean less demand,” said Mark Zandi, chief economist at Moody’s Analytics, to CNN.
In terms of inflation, Federal Reserve Chairman Jerome Powell, said that prices will remain elevated in the coming months, but will “moderate” once Americans adjust to the new normal. He has cited pent-up consumer demand and supply shortages as impacting any imminent recovery.
Foodservice Growth is Once Again in Positive Territory
As IFMA and Datassential announced last week, foodservice growth is forecast to be at 1% in real terms through 2023, a marked improvement over 2020, but still short of regaining ground from 2019.
Full-service restaurants will lead the gains on the restaurant side, while QSRs are expected to contract based on higher costs. On the non-commercial side, the return of foodservice and travelers will bolster K-12, College and University and Hotels/Lodging. More details from IFMA’s forecast are in the table.
Growth Forecasts Through 2023*
|Segment||2023 Real Growth||Notes|
|FSR – Casual Dining||1.6%||
|College and University||2.1%||
|Business and Industry||0.7%||
*Source: IFMA SCOPE 2021
Foodservice Will Once Again Flourish
One truism in the industry is that American culture has become intertwined with ordering out and prepared foods, and we expect that to continue once the worst of the pandemic is behind us.
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