Navigating the next 5 years in foodservice
If your commercial foodservice equipment and supplies (E&S) business has felt the squeeze over the last 12–18 months, you’re not alone.
While mainstream media headlines have hyper-fixated on soaring stock prices, the reality for domestic manufacturing and distribution has been a grueling combination of slowing economic growth and ballooning inventories that had to be painfully worked off.
However, at The NAFEM Show, ITR Economics Senior Forecaster Connor Lokar returned to @CenterStage with a highly anticipated, fresh persona: “Happy Connor.” Lokar delivered a welcome message to attendees, announcing that the economic outlook for the manufacturing sector is visibly improving.
Here is what dealers, operators and consultants need to know to capitalize on the upcoming growth cycle while positioning their businesses to weather longer-term turbulence.
The end of the manufacturing slump
Coming off the surging, unpredictable demand of 2021 and 2022, rising interest rates swiftly burned off backlogs and halted growth. While Europe and Japan continue to struggle and China’s internal metrics signal a recession, the United States remains the strongest market moving forward.
However, Lokar cautioned industry leaders against expecting a repeat of the pandemic-era boom. “What I don’t want folks doing is leaving this presentation and saying, ‘Connor says it’s going to be 2021 all over again,’” he noted.
Dealers and consultants should budget for normal, modest volume growth. Plan your inventories and project pipelines around steady years like 2017 or 2018.
Don’t buy into the consumer ‘doom and gloom’
To fully trust this growth forecast, operators and dealers must look past apocalyptic media narratives regarding the American consumer. Lokar pointed out that media outlets routinely frame normal seasonal fluctuations, like the standard post-holiday drop in January retail sales, as catastrophic events. The true turning point for consumers is happening right now. In 2022, sky-high inflation devoured salary increases. Today, with inflation hovering in the high 2 percent to low 3 percent range and workers receiving 3.5 percent to 4.5 percent raises, real incomes are finally rising.
Increasing incomes mean discretionary spending will hold steady. This positive shift translates to better retail and restaurant outcomes, driving renewed demand for foodservice E&S.
Tariffs, inflation and ‘supply chain hygiene’
In this environment, tariffs act as “sprinkles on top” of an already inflationary cake. Lokar warned that many businesses have a false sense of security regarding their exposure to China. Buying from a U.S. or Mexican distributor does not guarantee your products aren’t ultimately sourced from China – and hidden exposure could lead to sudden, suspicious price hikes.
Consultants and dealers must practice meticulous “supply chain hygiene,” aggressively verify the material origins of the E&S you specify and stock. The clear winners in this environment will be manufacturers with largely domestic supply bases.
The 2030 Great Depression warning
While 2026 presents a clear runway for growth, ITR Economics is holding firm on its most sobering forecast: a severe structural depression in the 2030s, driven by massive deficit spending and the retirement of the Baby Boomer generation.
For the foodservice industry, the 2030s will require resilience. Lokar’s primary directive to business leaders today is to “make hay while the economic sun is shining.”
Use the current growth period to ruthlessly consolidate debt, eliminate variable-rate exposures and build a war chest of dry powder. When the 2030s arrive, unprepared businesses will be forced to sell. Those who planned ahead will be positioned to capitalize on life-changing acquisition opportunities. As Lokar advised: “Be the buyer, not the buy-ee.”
