As a longtime partner of the International Foodservice Manufacturers Association (IFMA), we were thrilled to recently sponsor IFMA’s webinar titled, “2023-2024 Foodservice Industry Forecasts,” where the topic of conversation focused on projections, key considerations, and spend for this year and next in the foodservice industry.
The webinar began with a look at the economy and key economic indicators.
In January of 2023, the unemployment rate remains relatively low at a level of 3.4%. Low unemployment is typically viewed as a good thing in the foodservice industry because it generally indicates that there are more discretionary dollars in consumers’ pockets to spend on things like food.
Consumer Price Index (CPI):
The consumer price index graph below compares the inflationary pressure on food away from home, food in home, and overall inflation. The inflation index for food is higher than that of general inflation. Consumers are seeing these inflationary prices on grocery store shelves in items like eggs and milk, more than they are in foodservice restaurants. This could be attributed to foodservice or retail restaurants not being able to pass costs as directly to consumers as easily as a grocery store can.
The in-home food inflation trending higher than the foodservice sector has potential to impact the foodservice sector. As consumers spend more on higher grocery bills, they will have less discretionary dollars to spend at foodservice restaurants. This could hamper margins for the foodservice industry.
Consumer sentiment is relatively low compared to where we have been in previous years. While the general trend of consumer sentiment is increasing, the US population still shows skepticism about the future of a positive economic climate.
With the macroeconomic conditions at top of mind, the conversation transitioned into the key trends and considerations that foodservice companies should be aware of in 2023.
- Labor shortages: Expect labor shortages to continue. Foodservice operators will have a hard time not only finding qualified labor, but also retaining qualified labor.
- Distributor/foodservice manufacturer relationship: Expect this relationship to evolve. The distributor is going to continue asking for more from their suppliers in return for possibly less.
- Recession: Will we have recession this year? That’s a big question on everyone’s mind and economic analysts have differing perspectives.
- Money more expensive: With all the fed rate hikes, money is going to be more expensive to borrow. When that happens, credit card debt tends to increase and overall spending seems to go down, especially on discretionary spend items, such as going to a sit-down restaurant.
Overall, IFMA is expecting real foodservice growth to have a steep drop off in 2023 and 2024. IFMA predicts that the post-pandemic growth phase is over, and the industry is back to growing at a relatively low rate. They predict the foodservice industry growth to be at a real rate of 0.1 in 2023 as well as 2024.
What does this mean for you?
The effects on your business can vary depending on the type of business you operate in. IFMA went over the various factors to be aware of as a restaurant operator, as an onsite operator, and as a foodservice manufacturer.
Restaurant Operator: 2023 Restaurant Operator spend is expected to total $176.1B. The top three drivers of cost in this space are Quick Service Restaurants ($77.3B), Casual Dining Restaurants ($54.3B), and Fast Casual Restaurants ($20.4B). For Quick Service Restaurant’s IFMA warned about the cost of delivery and the rising disposables/packaging costs slowing growth and adding costs. They look at loyalty programs and drive thrus to help increase revenue.
Onsite Operator: Onsite Operator spend is expected to total $79.09B in 2023. The top three drivers of cost in this space are Healthcare ($14.7B), Lodging ($14.4B), and Other ($14B). For the Healthcare sector IFMA includes Hospitals, LTCs, and Senior Living businesses. The things to be on the lookout for include balancing patient/visitor vs. staff needs and the option for at-home care and recovery. In opposition, the aging population of the United States and the “recession proof” healthcare industry will help onsite operators drive growth.
Foodservice Manufacturers: Foodservice manufacturers were not called out directly during the webinar but should be aware of their distributors asking for more for less money as the distributors face the pressures outlined above via their operators. Foodservice manufacturers could also be impacted by increasing packaging costs and supply chain fluctuations.
While macroeconomic conditions continue to shift and the future remains largely unpredictable, many food and consumables companies are turning to Profit and Revenue Optimization Software to help them become proactive instead of reactive. Join PROS at Outperform 2023 in Denver, CO, from May 22-24 to discover the secret to AI-powered profitable growth. Check out the agenda and register today!