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The foodservice segment sees a psychological shift

by Steve Bjerklie
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The foodservice industry, especially high-end restaurants and, thus, their meat and poultry suppliers, could feel the recession’s squeeze for longer than other sectors of the economy. Recession-caused shifts in consumer spending for and consumption of food are not likely to reverse once the recession is declared over, says Dennis Lombardi, executive vice president, foodservice strategies, at WD Partners.

“There’s a permanent change around older boomers and seniors,” he told MEATPOULTRY.com. “They have witnessed a real reduction in wealth and that can’t be ignored. It’s a psychological shift.”
He said that in general, there’s been a “movement toward lower-produced venues and lower-priced menu items” in foodservice. “The biggest drops in visitor frequency have been in high-end restaurants, unsurprisingly.

“But it’s not a lock-step shift downward,” he added. “We’re seeing changing patterns of eating. People are consuming smaller meals and doing more meal-skipping. And one of the biggest ‘new’ competitors, if you will, for QSRs and casual restaurants is the bag lunch brought to work from home.”

That’s showing up in sales. McDonald’s posted its first same-store sales declines in many years in October and November of 2009. At the same time, Yum! Brands, parent of Taxo Bell, Pizza Hut and KFC, posted a six percent decline in same-store sales in the third quarter of FY09. Burger King posted a three percent decline in the same period. The impact on share prices has been mixed, but all publicly traded QSR chains are trading below recent highs. According to Zacks Research, an industry-watching consultancy, the “industry remains under pressure in the current economic downturn, which has badly affected consumers’ disposable income.” At the same time, the down-shifting trend has brought more customers to QSRs, according to Technomic. According to recent Technomic data, 49 percent of consumers say they eat at fast-food restaurants at least once a week, and one in four consumers say they have increase their visits over the past year, higher than any other foodservice category.

“The focus now is on value, and that’s going to be a necessary component in both QSRs and casual chains,” Lombardi told MEATPOULTRY.com. “Compared to full-service restaurants, where we might see some growth is in limited-service restaurants due to their lower labor needs. Also, these are the kinds of restaurants where you don’t generally leave a tip. That’s appealing in this kind of economic climate.”
He said that he agrees with the conventional wisdom “that says we’re slowly clawing our way out of the bottom. There’s been a little bit of job growth – it’s been disappointing, but it’s still growth, it’s still new jobs. But I think it’ll take the high-end sector a lot longer to regain their former position in the foodservice economy.”

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