Business & Industry

B&I is the soft spot in the onsite foodservice market as it has been for several years. Technomic is forecasting B&I food manufacturer shipments will decline by 5 percent in nominal terms. Corporate downsizing, the Wall Street implosion, an economy in deep recession and a shrinking national manufacturing base have all taken their toll.

(Of note, Technomic this year significantly changed how it estimates B&I activity. Refer to “How Big is B&I” on p. 10 of the December issue for specifics, or go to www. food-management.com/segments/bi_contract/bi_technomic_1211).

Select charts to enlarge.

One sign of the segment's challenges: research from NPD Group showing that “brown bagging” by employees is on an upswing. (Figs. 19 and 20). Another appears in the release of last year's benchmarking survey from the Society for Foodservice Management, which underscores the difficulty operators in the segment have in terms of raising check averages (Fig. 18).

It remains to be seen exactly how all of this will affect the B&I revenue of major contract companies. They have demonstrated a remarkable ability to sustain this segment in spite of its constraints, employing sophisticated menu, marketing business and procurement strategies to grow top line volume even as gross food purchases have remained flat or have declined.

Still, “we know that food costs went up over five percent last year, even as market basket studies show that retail prices increased only about 3.8 percent” says Tom Newcomb, president of FoodMark®/Corporate Dining, Inc., the research firm that compiled the SFM survey. “In 2009, providers will have to find some way to make up the difference.”

Newcomb says that close examination of SFM's data to compare the operations of those accounts operating at a surplus vs. those at a deficit suggests that differences in labor costs are often a key differentiating factor. “Those looking to reduce these costs are going to have to ‘transition' that labor component in some way,” to make it more competitive, he says.

He believes such pressures, along with continuing downsizing of B&I onsite populations, will “result in a significant amount of contract re-negotiation and RFP activity” in the coming year.

“Global contracts, whether national or international, have been trendy for the past decade,” he adds. “But our studies suggest some clients are now reconsidering this and may look to break some of them up, awarding them to a wider variety of providers.”