Food Service Industry Spotlight 2011

By Sonja Sobota; Rueya Ceylan, Research Analysts

The food service industry is one of the largest industries in the United States.

Statistics by the U.S Bureau of Labor state that food preparation and serving related sectors combined to be the third largest employer by occupational groups in metropolitan and nonmetropolitan areas.

It is indicated that 2011 could be an excellent year for the restaurant industry.  Sales are expected to climb up to a four year high, according to industry analysts.  A recently released report by research firm Technomic predicts that the total U.S food service sales will overshadow 2010 by an increase of 1.7% in sales on a nominal basis and dipping just 0.3% on a real basis, which takes inflation into menu price consideration.  And if this forecast is realized, it would be some of the highest growth since 2008.

Specialists like David Tarantino, an analyst at financial management firm Baird, helps to confirm this trend.  He announced in an article from Forbes via the Associated Press that due to the strong sales in 2010 among restaurant chains, he believes food service to be in a “correction phase,” noting companies that “cater to higher income customers,” such as fast-casual and chafe chains, “will see the most stabilization and growth.”

Even though the U.S job market is still sluggish, restaurants and other foods service destinations are on pace to add over 100,000 jobs since last summer, making them the biggest job producers in 2010, reports USA Today.

Dean Maki, Chief U.S Economist of Barclays Capital, explains this growth: “It’s an important sector to have growing because [fusion_builder_container hundred_percent=”yes” overflow=”visible”][fusion_builder_row][fusion_builder_column type=”1_1″ background_position=”left top” background_color=”” border_size=”” border_color=”” border_style=”solid” spacing=”yes” background_image=”” background_repeat=”no-repeat” padding=”” margin_top=”0px” margin_bottom=”0px” class=”” id=”” animation_type=”” animation_speed=”0.3″ animation_direction=”left” hide_on_mobile=”no” center_content=”no” min_height=”none”][it] consistently adds significant numbers of jobs during expansions.  It’s a very reliable indicator that the overall job market is picking up.”

Despite its good influence on the economy, the high food consumption also has a major drawback: Obesity.  American obesity is rising in 28 states and adult obesity went up over 20 percent since 1991, reports the Trust for America’s Health (TFAH).  This is the reason why food service industries have to participate in producing healthier and more organic based food.

Food safety is also an issue. Even though America is one of the safest food suppliers in the world, the U.S Food and Drug Administration (FDA) rates almost 80 million cases of food related illness per year.  In response to this. the House of Congress passed a law for preventative control of food import and export in December 2010.

The food service industries also need to be more transparent for consumers because an increasing number of people get food allergies (such as lactose intolerance and nut allergies). The Food Allergen Labeling and Consumer Protection Act of 2004 gives more protection to consumers. Members of the food service industry must now list all allergens and common names for ingredients in their ingredient labeling process.  In addition, menus must show all ingredients and the caloric content.  The goal for many providers is to supply a good tasting meal with healthier ingredients.

Furthermore the food service industry has to struggle with increasing commodity prices. The United Nations is warning of another food price shock as corn and soybean prices are at their highest level in 2.5 years and soybeans stockpiles at 30 year lows.  It could surpass the 2008 scare that triggered food riots in develping countries around the globe.  Economist David Rosenberg is warning: “We clearly have a global food crisis on our hands.”

According to Wells Fargo the price of meat, especially for pork and beef will be rise twice as much than last year.

In the United States food prices account for, on average, 10 percent up to 14 percent of personal income (vs. about 50 percent in the developing world). Nevertheless they have an impact on consumer confidence and job creation, and this time looks to be no different, especially combined with the tug of higher energy prices.

Sustainability

There are also many opportunities for improved sustainability in the food service industry.  Fair Trade is one example.

TransFair USA is a community that secures fair trade production, helping farmers produce the capital needed to buy the the goods needed for their businesses.  One of their biggest members is Starbucks, which only uses fair trade beans in its coffee.  Transfair USA’s biggest job is empowering farmers to lift themselves out of poverty by investing in their farms and communities, protecting the environment, and developing the business skills necessary to compete in the global marketplace.  Fair trade, by definition,  also includes fair prices, fair labor conditions and environmentally sustainable efforts.

By setting up green buildings, factories can produce energy efficient products by reducing unnecessary energy or by using renewable energy.  This associates a reduction of CO2 emissions.  So far the U.S Green Building Council (USGBC), a non profit organization, counts more than 18,000 members in leading enterprises and communities implementing this green technology.

Food Inventory Management

Food Inventory management means calculating, checking and minimizing costs for food.

In restaurants, food costs are one of the highest controllable costs.  Dealing with food is a challenge because of its perishability.  As a fact almost every ingredient has a limited shelf life, much of it less than a week.  There are large quantities of people and instruments that directly handle food inventory.  Regardless of size, even small restaurants need more than dozens of employees to produce, prepare and finally serve the food to the consumer.  To manage profitability, restaurants turn to food inventory management within the organization.

Food inventory systems are complicated to control and are hard to administer at the store level.  Older store-based technologies usually struggle because they often require desktop solutions that are up to date.

For restaurant chains, centralized browser based food management modules are considered by some to be a robust alternative.  Other advantages may include centralized ingredient and recipe management, managed inventory by unlimited number of ingredients and count frequencies, computed real-time product variance, generative warning messages, established user audit trails, transferred product between locations and record waste.