Thursday, July 31, 2008

More People Shopping, Less Dining

Higher gas prices and a slumping economy are reshuffling food dollars, industry leaders indicated in late July.

“The bottom line is, the general economy is not doing very well,” said Desmond O’Rourke, economist and president of Belrose Inc., Pullman, Wash.

He noted one Wall Street firm has estimated wealth lost in the last 12 months from the stock market and the housing market totaled $5.2 trillion, or about 36% of the gross domestic product for the year.

Dour sales projections

The Washington, D.C.-based National Restaurant Association reported June 30 only 12% of operators surveyed that month expected economic conditions to improve by year’s end. The NRA said that was the lowest level in the history of the six-year history of the Restaurant Performance Index.

Likewise, the Consumer Confidence Index from The Nielsen Co., New York, in June plunged to 88, which is down six points in six months. Nielsen said the plunge was the largest single drop in three years.

Instead of eating away from home, O’Rourke said evidence suggests people are tilting their food purchases to supermarkets. supercenters and discount stores.

Restaurant shakeout

Meanwhile, O’Rourke said mid-scale restaurants are facing a shakeout.

“More and more consumers are going to a supermarket and building meals they would normally buy in a restaurant,” he said.

Recent industry-wide foodservice sales numbers from Chicago-based Technomic Inc. showed May sales this year were off about 2% from a year ago, said Tim York, president of Markon Cooperative, Salinas, Calif.

Adjusting for inflation, overall foodservice sales may be off 5% or 6% compared with last year.

“I think we are still in for some tough sledding with the produce industry and the foodservice industry in general,” he said July 22.

York said growers are suffering from higher input costs, distributors are being stressed by higher fuel costs in their deliveries and operators are facing declining business and rising product costs.

York said anecdotal reports reveal that consumers may be scaling down dining choices when they go out.

“They may go from family dining to a fast causal,” he said. “People in general are looking to limit their food costs.”

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