STUDY SEES APPETIZING FUTURE FOR FOOD SERVICE

WASHINGTON -- Sales in retail-host restaurants, a category that includes supermarkets, should grow by 6.6% in 1998, according to an annual food-service study released by the National Restaurant Association here.The proliferation of coffee bars, warehouse clubs and miscellaneous retail stores, including liquor stores and bookstores with cafes, is expected to lead the retail-host advance to $15.2 billion

WASHINGTON -- Sales in retail-host restaurants, a category that includes supermarkets, should grow by 6.6% in 1998, according to an annual food-service study released by the National Restaurant Association here.

The proliferation of coffee bars, warehouse clubs and miscellaneous retail stores, including liquor stores and bookstores with cafes, is expected to lead the retail-host advance to $15.2 billion in sales this year, up from $14.3 billion projected for 1997, according to the report.

Sales in other segments of the retail-host category, including supermarkets, delis and grocery/convenience stores, will continue at a steady pace, the study predicts.

Supermarket sales have prospered, according to the report, due to the evolution in takeout foods and the proliferation of in-store bagel operations.

Fast-food restaurant sales, meanwhile, will pass the $110 billion mark, and college and university food-service operations will grow by nearly 8%, the fastest of any food-service category, said the restaurant trade group.

Food stores excluding supermarkets are expected to have the highest growth rate inside the category, fueled by the coffee bar boom.

Sales in the general-merchandise category are expected to rise due to brisk food business at warehouse clubs, and such miscellaneous retail locations as book stores should continue to add on or expand in-store cafes.

Meanwhile, more than four out of 10 quick-service restaurant operators in the survey identified bagels, espresso and specialty coffees, and "real meals" -- defined for the study as an entree plus a choice of side dishes -- as items that are gaining in popularity among consumers.

Limited-service restaurant "real meals" are considered competition not only for supermarket ready-to-eat and ready-to-heat meals, but for frozen meals as well. As a result, quick-service operators expect to experience more competition from supermarkets and other food retailers as well as new restaurant concepts and the evolution of existing concepts that specialize in "real meals," the report said.

"In the 1990s, freshly prepared carryout food has become more and more readily available and easy to access, to the point where regular users give less and less thought to where to go get it," according to the report.

In other highlights of the 20-page study, bundled meals, used by quick-service restaurants to boost check averages, are expected by nearly 80% of operators to be even more popular in 1998. Indeed, more operators use bundled meals promotions than employ quantity discounts for larger sizes -- 75% compared with 55%.

Bundled quick-service restaurant meals usually consist of a sandwich, french fries and a beverage, and its items are priced lower than each individual item purchased separately. With higher profit margins usually obtainable for the fries and beverages than the sandwich, operators anticipate higher profit margins from bundled sales, even though gross sales may suffer.

Total restaurant industry sales are expected to top $336.4 billion, an increase of $15.1 billion in 1998, or 4.7% over 1997.

"Sales growth in the industry is a reflection of consumers' escalating need for meals and snacks prepared outside the home," concluded the report.

The report notes some other interesting facts about restaurant trends. Due to the difficulty operators have hiring qualified employees and their need to increase productivity, almost nine out of 10 table-service restaurant operators surveyed said they purchase at least one product that is either fully or partially prepared off-premises.

Operators with lower check averages are more likely to purchase prepared foods from a third party. Also, more than half of the table-service operators surveyed reported purchasing preportioned meats and desserts, while more than 40% purchased soup and sauce bases. And about one in four bought prechopped salads.

About half the table-service restaurant operators surveyed said they believed vegetarian items are gaining in popularity among customers. Slightly fewer said locally grown produce is becoming more popular, and 20% said organic items are gaining. About 40% said "fusion" dishes, which combine international cuisines, should continue to be popular.

Sales projections in the report, released last month, are based on data available in October, 1997, and would require adjustment if general economic conditions or those affecting the food industry change significantly, according to the trade association.