Driven by continued high labor and commodity costs, along with consumer inflation concerns, the outlook for the U.S. foodservice industry looks bleak for the first half of 2023.
The U.S. Bureau of Labor Statistics reported a 8.3 percent year-over-year hike in prices for food away from home in December 2022, with sales dropping 0.9 percent to USD 88.3 billion (EUR 81 billion) from November to December, according to preliminary data from the U.S. Census Bureau.
The trifecta of higher food costs, labor costs, and energy/utility costs are now a significant challenge for a majority of operations, according to the the National Restaurant Association’s Business Conditions survey. A vast majority (92 percent) of restaurant operators surveyed say food costs are a significant challenge, and 89 percent said labor costs are a significant challenge. As a result, 50 percent of operators expect to record lower profits in 2023, according to the NRA.
Rancho Dominguez, California, U.S.A.-based Santa Monica Seafood President and CEO Roger O’Brien told SeafoodSource, despite his own company’s positive outlook for its foodservice-sector performance, he expects to see many small foodservice groups go out of business in the first half of 2023.
“Those that make it past then should survive and slowly rebound as the economy improves, product costs come down and the labor market opens,” O’Brien said.
Foodservice “got hit so much harder during the pandemic than retailers, and there are lots of smaller, independent restaurants still suffering,” O’Brien said. “Many are still behind in rent and are still suffering with a variety of labor issues – cost and availability – and most restaurants don’t have the capital resources retailers have.”
Additionally, after handing out USD 21 billion (then EUR 25.5 billion) in funds in 2021, the U.S. government failed to pass additional financial support for the industry, “despite being the instigator behind the many closures and restrictions that fell on restaurant groups,” O’Brien said.
“So, when you’re already in a hole financially, you’ve got more digging to do to get out,” he said.
According to foodservice research firm Technomic, the listing of seafood on restaurant menus rose 0.3 percent in 2022, meaning the difficulties restaurants have faced have not significantly impacted their menuing of seafood.
“[Sales] are holding steady over the past year, but have still not bounced back to prior Covid-19 levels,” Datassential Associate Director of Content Claire Conaghan told SeafoodSource.
Seafood sales through foodservice were essentially flat in 2022, Performance Food Group Vice President of Procurement Mike Seidel said at the National Fisheries Institute’s Global Seafood Markets Conference on Tuesday, 17 January in La Quinta, California, U.S.A. But finfish was a big winner, with total sales increasing 9.1 percent by value for the 12 months ending in November 2022, Seidel said.
However, 61 percent of Americans say they are eating out less often, according to a new Acosta shopper insights survey, and around 50 percent of consumers believe the U.S. is in a recession. Agreeing with that viewpoint is Wells Fargo Senior Economist Tim Quinlan, who said at GSMC has “penciled in” a recession for 2023.
IRI’s December Consumer Sentiment survey found the share of households that purchased restaurant meals declined from 80 percent in November 2022 to 76 percent in December, 210 Analytics Principal Anne-Marie Roerink shared at Elanco’s “Seafood in the U.S. retail” webinar on 26 January.
Roerink said 71 percent of American surveyed said they are buying restaurant meals less often, and of those buying fewer restaurant meals, 41 percent are trying to re-create them at home. The share of home-prepared meals jumped from 78.9 percent in November to 81.5 percent in December, according to IRI’s December survey.
“Over the last couple of years, we have seen an increase in dining in restaurants, but it's still not back to pre-pandemic levels,” shopping data firm Acosta said in its survey overview. “And now, with inflation and other economic factors, there will be a struggle to get there this year.”
Nonetheless, there is pent-up demand among Americans for gathering together and dining out, according to the National Restaurant Association’s What’s Hot 2023 Culinary Forecast. NRA’s survey of 500 professional chefs found that 70 percent believe customers want in-restaurant experiences for socialization, celebration, and culinary exploration.
And a National Restaurant Association survey fielded 13 to 15 January further revealed Americans’ pent-up demand for dining out. Forty-four percent of adults surveyed said they are not going out to restaurants as often as they would like and 36 percent of Americans say they are not ordering takeout or delivery from restaurants as often as they would like.
“Moderate but positive employment growth across the economy and elevated consumer spending in restaurants will allow the restaurant industry to kick off 2023 on a more optimistic note than the last few years, but operators remain braced for potential challenges in the new year,” NRA Senior Vice President of Research Hudson Riehle said in a press release.
Overall, the seafood industry and the foodservice industry have proven their resilience by surviving the eight U.S. recessions of the past 50 years and the “worst of them all”, the Covid-19 pandemic, O’Brien said.
“We’ll figure out how to navigate 2023,” he said. “This is not anyone’s first rodeo.”
Photo courtesy of ChameleonsEye/Shutterstock
