FE&S’

2015 Industry Forecast

October 21, 2014

Review data from FE&S’ 2015 Foodservice Equipment and Supplies Industry Forecast.

Explore the economic issues impacting the foodservice industry with industry experts Hudson Riehle and David Henkes.

Forecast the operating environment for 2015.

Answer your questions.

Today’s Agenda

Meet Our Panelists

David HenkesVice President, TechnomicTwitter: @davidhenkes

Hudson RiehleSr. VP, Research & Knowledge Group

National Restaurant AssociationTwitter: @HudsonRiehle

These slides are from a free webcast from Foodservice Equipment &

Supplies magazine. You may access the free on-demand archive here:

http://www.fesmag.com/forecast2015

THANKS TO OUR SPONSOR

2015 FOODSERVICE

OPERATOR OUTLOOK

Operators’ Anticipated Sales Volume: 2014 vs. 2013

Increase55%

Stay the same32%

Decrease13% Net growth rate:

2014: +2.74%

2013: +3.50%

2012: +3.37%

2011: +2.20%

Comm. Non-comm

Increase 58% 51%

Same 26% 38%

Decrease 16% 11%

2014 Sales Volume by Market

Sector

Operator Gross Profits for 2014

Increase41%

Stay the same37%

Decrease22%

Net growth rate

Gross Profit:

2014: +0.9%

2013: +0.8%

2012: +0.7%

2011: +0.1%

Comm Non-comm

Increase 52% 29%

Same 21% 54%

Decrease 27% 17%

2014 Change by Market Sector

Increases in gross profit continues in a positive direction at a conservative pace.

Gross Profit Growth Trend (6 Years)

0%

10%

20%

30%

40%

50%

60%

2009 2010 2011 2012 2013 2014

Increase Remain the Same Decrease

Anticipated Operator Sales Growth for 2015

Increase55%

Stay the same32%

Decrease 11%Net projected growth rate

2014: + 2.74%

Comm Non-comm

Increase 67% 41%

Same 17% 47%

Decrease 16% 12%

2015 Growth by Market Sector

About 20% more operators anticipate sales growth in 2015 than they did at this time in

2014.

Operators’ Anticipated Gross Profit for 2015

Increase35%

Stay the same43%

Decrease22%

Net growth rate 2015

Gross Profit: + .71%

Comm Non-comm

Increase 46% 26%

Same 26% 57%

Decrease 28% 17%

2015 Gross Profit Growth by Market Sector

Operators anticipate conservative gross profit growth for 2015 although there are many

factors that could derail growth such as rising food costs, increasing labor costs and

unexpected changes in the economy.

OPERATOR PURCHASING

BEHAVIORS

Activity Planned for 2015

19%

22%

26%

29%

30%

62%

0% 20% 40% 60% 80% 100%

None of these

New Construction

Kitchen Renovation

Dining room Renovation

Dining room Replacements

Kitchen Equipment Replacement

There are no significant changes from 2014 in the anticipated types of equipment purchases

for 2015.

Percent of 2015 E&S Budget by Activity Type

New Construction

13%

Renovations21%

Replacements59%

Green or Sustainable Initiatives

7%

Comm Non-comm

New

Construction 18% 5%

Renovation 22% 19%

Replacement 54% 69%

Green 6% 7%

2015 E&S Budget by Market Sector

Operators’ 2015 E&S Budgets

Increase39%

Reamin the same

42%

Decrease19%

52%

24%

17%

7%

$2.5 million ormore

$500K-$2.49million

$100-$499.9K

Under $100K

2015 E&S Budget Growth

Projected Net Growth Rate 2015 = 1.64%

2015 E&S Budget

Comm Non-comm

Increase 49% 28%

Same 29% 55%

Decrease 22% 17%

Percent of E&S Budget – Product Categories

9.4% 9.2% 8.3% 8.7% 9.8%

14.8% 14.9% 16.2% 17.1% 14.2%

5.8% 4.4% 4.3% 3.3% 3.8%

4.9% 4.1% 5.0% 4.0% 3.4%

11.3%10.4% 10.0% 11.8%

11.5%

5.7%4.7% 4.5% 6.0%

6.3%

7.2%8.0% 8.3%

8.0%6.8%

8.6%9.8%

12.4% 9.6%11.2%

5.1%5.0%

5.5% 5.7%4.6%

9.0% 11.6%11.9% 10.9%

10.8%

18.2% 17.9%13.6% 14.9% 17.6% Primary Cooking

Eqpt

Refrigeration

Warewashing/Safety

Food Prep Eqpt.

Serving Eqpt.

Storage & HandlingEqpt.

Smallwares

Tabletop Items

Furnishings

Paper Goods/Disposables

Jan/San Supplies

2013 2012 201120142015

Percent of 2015 E&S Budget – Market Sector

5.5%11.8%

7.9%

21.9%10.5%

2.8%

7.8%

3.2%12.8%

10.1%5.9%

5.7%5.2%

7.7%10.1%

7.6%3.5%

6.3%9.5%

7.6%

21.3%15.3% Primary Cooking

Eqpt

Refrigeration

Warewashing/Safety

Food Prep Eqpt.

Serving Eqpt.

Storage & HandlingEqpt.

Smallwares

Tabletop Items

Furnishings

Paper Goods/Disposables

Jan/San Supplies

Commercial Non-commercial

Percent of Operator E&S Purchases by Channel

Traditional E&S Dealers

30%

Broadline Distributors

16%Direct from Manufacturer

13%

Cash & Carry5%

On-line Catalog House

4%

Specialty Distributor

14%

Club Store1%

Buying Group10%

Other7%

Operator E&S Purchases Made Online

None27%

1-5%19%

6-15%10%

16-25%20%

More than 25%24%

Average = 25.5%

Commercial = 20.5%

Non-commercial = 29.7%

DEALER OUTLOOK FOR 2015

Dealers Anticipated Sales Volume: 2014 vs. 2013

Increase62%

Stay the same30%

Decrease8%

Trend:

(% Increase)

2014: 62%

2013: 75%

2012: 53%

2011: 61%

Net growth rate: :

2014: +5.17%

2013: +5.38%

2012: +4.20%

Product Categories Driving Dealers’ 2014 Sales Growth

2%

6%

11%

18%

22%

33%

33%34%

39%

56%

67%

83%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Other

Janitorial/Sanitation

Paper Goods/Disposables

Tabletop Items

Furnishings

Serving Eqpt

Warewashing/Safety Eqpt

Smallwares

Storage & Handling Eqpt

Food Prep Eqpt

Primary Cooking Eqpt

Refrigeration/Ice Machines

Growth of 2014 E&S Sales Gross Profit

Increase37%

Stay the same48%

Decrease15%

Net growth rate

Gross Profit:

2014: +1.24%

2013: +1.80%

2012: +3.76%

Gross profits remained positive in 2014 but were more modest than in 2013.

Dealers Anticipated Sales for 2015

Increase65%

Stay the same28%

Decrease7%

Net projected growth

rate 2015: + 4.86%

Dealers project continued growth for 2015 at a net

growth rate similar to 2014.

Dealers Amount of Business Booked for Next

Fiscal Year Compared to This Time Last Year

More52%

Same31%

Less17%

Net rate ahead of last

year:

2014: +4.07%

2013: +3.80%

2012: +2.41%Trend:

(% More)

2014: 52%

2013: 46%

2012: 49%

2011: 45%

2010: 34%

Percent of Sales by Product Category

2.46%2.33%3.41%

6.73%

10.75%

4.48%

4.50%

9.12%

4.98%

26.14%

25.10%

Primary CookingEqpt

Refrigeration/ IceMachines

Warewashing/Safety Eqpt

Food Prep Eqpt

Serving Eqpt

Storage &Handling Eqpt

Smallwares

Tabletop Items

Furnishings

Paper Goods/Disposables

Janitorial/Sanitation

2.13%2.17%3.11%

6.55%

9.81%

4.70%

5.16%

10.74%

5.37%

26.97%

23.29%

Primary CookingEqpt

Refrigeration/ IceMachines

Warewashing/Safety Eqpt

Food Prep Eqpt

Serving Eqpt

Storage &Handling Eqpt

Smallwares

Tabletop Items

Furnishings

Paper Goods/Disposables

Janitorial/Sanitation

2014 Projected for 2015

Product Categories That Will Drive 2015 Sales Growth

1%

11%16%

16%

26%

32%

32%

42%

47%

58%

63%

89%

0% 20% 40% 60% 80% 100%

Other

Janitorial/Sanitation

Paper Goods/Disposables

Furnishings

Tabletop Items

Storage & Handling Eqpt

Warewashing/Safety Eqpt

Smallwares

Serving Eqpt

Food Prep Eqpt

Primary Cooking Eqpt

Refrigeration/Ice…

QUESTIONS FOR OUR

PANELISTS

Assessing the foodservice

industry’s performance thus

far in 2014.

Recapping 2014 – Technomic’s Take:Year got off to a slow start due to the weather.

Growth has been slow but steady since then.Overall industry achieved approximately 3%

nominal growth, or flat in real termsStill a lot of need for innovation

FE&S 2015 Equipment and Supplies Forecast

Reasons for Optimism

1. Economy declined 2.1% in the first quarter but has since rebounded to post increases in excess of 3%

2. Number of jobs finally caught up to pre-recession levels

3. Consumer confidence is at its highest level in 7 years

FE&S 2015 Equipment and Supplies Forecast

Restaurant Industry’s Share

of the Food Dollar

1955

Present

1955: 25% 2014: 47%

Source: National Restaurant Association

How have operators’

concerns changed as the

business climate has evolved?

Top Challenges Facing Operators

AUGUST 2014

Food Costs 29%

Government 16

The Economy 16

Recruiting Employees 9

Sales Volume 8

AUGUST 2012

The Economy 28%

Food Costs 20

Government 14

Sales Volume 12

Recruiting Employees 5

AUGUST 2013

Government 24%

The Economy 19

Sales Volume 18

Food Costs 16

Recruiting Employees 6

Source: National Restaurant Association, Restaurant Industry Tracking Survey

How stable is the foodservice

industry heading into 2015?

Contributing factors to the industry’s stability:The restaurant industry is pretty mature, which

leads to stabilityEating out is in the consumers’ DNAWeathered the recession wellIndustry growth will take off once the middle and

lower classes get stronger

FE&S’ 2015 Equipment and Supplies Forecast

What will 2015 look like for

the foodservice industry?

2015 Preliminary U.S. Economic Outlook

Gradual Improvement

INDICATOR 2014 2015

Real Gross Domestic Product 2.1% 3.0%

Real Disposable Personal Income 2.6% 2.8%

Consumer Price Index 1.7% 2.0%

Source: National Restaurant Association, projections as of October 2014

Technomic’s take:2015 will see overall foodservice industry sales

grow by 3.1% nominally or 1.2% in real termsSlightly better economic environment for the U.S.

should benefit the foodservice industryBut restaurants remain in a take-share market

FE&S’ 2015 Equipment and Supplies Forecast

Technomic’s projected growth rate by segment:

Limited-service restaurants will grow by 3.5% in 2014 and 3% in 2015

Full-service restaurants will grow by 2.5% in 2014 and 3% in 2015

Bars and taverns will grow by 2.5 percent in 2014 and 2015

In other words, restaurants will be in a take-share mode in 2015.

FE&S’ 2015 Equipment and Supplies Forecast

How are consumers’ spending

habits changing?

Many factors impact consumers’ approach1. Consumers’ outlook varies by location and

other demographics2. As a percent of consumers’ budget, food

ranks third behind housing and transportation. Insurance/pensions starting to creep up the list, too.

3. It’s best to examine consumer behavior on a segment by segment basis.

FE&S’ 2015 Equipment and Supplies Forecast

Any concerns heading into

2015?

Three reasons for concern heading into 2015:

1. Wholesale food prices on pace for fastest growth in three years

2. Although moderate, menu price growth outpacing other segments like grocery

3. Job creation still slower than previous recoveries

FE&S’ 2015 Equipment and Supplies Forecast

Questions?

©2011 Foodservice Equipment & Supplies – 2012 Industry Forecast

Due to a slow start, overall restaurant industry sales will be flat in 2014

2015 will bring better real growth but the industry will remain in take-share mode

Consumers’ approach will vary considerably depending on their location, age group and more

Key Takeaways

THANKS TO OUR SPONSOR

You can download today’s slides by clicking on the green folder below.

This webcast will be available in archive format shortly via www.fesmag.com.

View past FE&S webcasts at:www.fesmag.com/resources/webcasts

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©2011 Foodservice Equipment & Supplies – 2012 Industry Forecast

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