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The Future of Foodservice: Industry Overview

The Future of Foodservice: Industry Overview

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Last Published: 09/12/2019

 Profitability is shifting among the various segments of the foodservice industry.

 

The foodservice industry outlook varies by segment, and operators are adjusting their marketing strategies for this diverse environment.

Restaurants

The 2018 retail sales equivalent for restaurants and bars, including alcohol beverages sales, was approximately $599 billion. Nominal growth projections have been revised downward since then to 3.0%, with fast-casual being the key driver of growth at 5.3%4. Full-service restaurants (FSRs), on the other hand, struggle to compete on the value and convenience that many customers prefer.

The casual dining segment is at the core of the FSR segment’s woes, growing at only 2.0%; however, some chains are seeing same-store sales growth in the wake of the closures of underperforming units. By introducing on-trend menu items and enhanced beverage programs, several emerging casual dining chains are bucking the trend with impressive sales and unit growth. While this suggests that casual dining could undergo a turnaround, the segment needs to modernize to sustain that growth. It is the independent restaurants, which provide the unique flavors and experiences consumers crave, that will drive growth in the FSR segment overall.

Given the proliferation of restaurants and uneven growth, the oversaturation of the market is leading to consolidations. Mergers and acquisitions are increasing, particularly in the casual dining and QSR segments (e.g. the sale of Sonic to Inspire Brands). Operators are looking for ways to hit their long-term growth targets by purchasing other restaurants (e.g. Darden’s purchase of Cheddar’s Scratch Kitchen). Operators should expect additional mergers and acquisitions in the future.

Non-Commercial Foodservice

Growth in the $121.5 billion non-commercial foodservice industry has been relatively slow, growing at 3.2% in 2018 and expected to remain flat through 2019. Healthcare is a key driver of growth, propelled by ongoing expansion in hospitals and long-term care. The brightest spot in noncommercial foodservice is senior living, which is predicted to grow at 8.8% in 2018. An aging population, more seniors buying into senior living residences, and increased outpatient services have provided increased opportunities for operators in this space.

Entegra Procurement Services regularly publishes blog posts on food trends and innovations in food services. Entegra is more than a group purchasing organization (GPO): Our team of procurement specialists implement strategic sourcing to bring the most value to your business. We help our clients, in many segments ranging from the healthcare supply chain to restaurant supply, to cut costs and consolidate their portfolios.

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