WASHINGTON -- Sales of fresh meals are expected to keep heating up in 1999, with both supermarkets and restaurants providing the fuel, according to a new survey and industry observers.
The National Restaurant Association here has released its 1999 Restaurant Industry Forecast, which tracks projected growth throughout all segments of the industry. The report projects that sales will increase 4.6% over 1998 numbers, reaching a record $354 billion and marking the restaurant industry's eighth consecutive year of growth.
"The restaurant industry's future remains extremely bright," said Joseph Fassler, chairman of the board of the NRA and president and chief executive officer of Restaura Inc., based in Phoenix.
Though the NRA survey did not specify supermarkets in its forecast, retailers are expected to enjoy parallel growth in their fresh-meals programs, said food-industry experts.
"Recognizing the success of existing programs, many supermarkets are expanding their HMR offerings," said Ron Paul, president of Technomic Inc., Chicago. "This also includes new unit additions."
Paul noted these predictions are based on the dinner dayparts, which do not include the sale of sandwiches, another lucrative selling point for many chains.
Ann Joy, executive chef at Carr Gottstein Foods, Anchorage, Alaska, said fresh-meals sales have really taken off over the past year and many of her customers are couples where the husband and wife both work full-time. She predicts a heavier emphasis on providing healthier options than those typically found in popular restaurants.
"People today don't want to just stop off at McDonald's for the family meal," she said. "They want to provide a well-balanced, cooked meal. They just don't have the time to prepare it."
John Ness, executive chef for Mollie Stone's Market in San Francisco, agreed that people are just too busy for lengthy meal-times.
"It has gotten to the point where people don't even have the time to go to a sit-down restaurant," he said. "Their schedules don't allow for it and that's where we come in. Sales of our ready-to-heat meals have steadily risen and we expect this to continue in the new year."
Those watching the fresh-meals industry said supermarkets are growing more formidable as competitors to the restaurant industry every year, to the point where retailers are beginning to help shape the way the segment evolves.
"As sales continue to increase, I think we'll see a difference in how [fresh meals] are defined," said George Tsokolas, director of fresh foods and food service for Senn-Delaney, a division of Arthur Andersen, Chicago. "Items such as sandwiches, usually dedicated to the deli area, should also be considered part of the home-meal replacement program. Anything prepared -- be it chilled, hot, ready-to-eat or ready-to-heat -- if it replaces customer preparation, it belongs with the HMR products."
Tsokolas pointed out that grocers have adopted more of a food-service mind-set than in past years, which in turn changes the perception that consumers have of them as a meal destination.
"Many have moved their HMR departments to the front of the store," he continued. "Some even have dedicated entrances, dedicated registers and dedicated employees for the section."
Among those restaurant segments most competitive with supermarket fresh-meals programs, sales at full-service restaurants -- the largest segment -- are expected to reach $117.3 billion, a 2.1% gain in real terms. Total sales at quick-service (fast-food) restaurants are forecast to grow to $110.4 billion, up 1.8% in inflation-adjusted dollars. The association forecasts that social caterers will continue as one of the fastest-growing segments in the restaurant industry, with sales topping $3.3 billion in 1999 -- a 2.2% real growth rate (see chart).
The NRA also listed growth projections for less retail-competitive segments, such as lodging, noncommercial operations and managed-service providers.
The Mountain region is expected to lead the country in eating-place sales growth, with the Mid-Atlantic region trailing in last place. Nevada is expected to head the states with projected growth of 7.1%, while California should continue to lead in sales volume with eating-place sales reaching $28.5 billion this year.
Trends to keep an eye on are minorities who have proven more likely than whites to be restaurant-industry patrons on a typical day. This, combined with strong population growth of those ethnic groups, makes it an area worth watching.
"At the same time, the pressure is on to find qualified workers to meet the growing customer demand," said the NRA's Fassler.
Strong labor-cost pressures are expected to cause menu prices to rise slightly over the course of the year. In 1998, a wage increase, for non-supervisory eating-and-drinking place employees, of more than three times the overall annual inflation rate, marked the strongest growth in restaurant labor costs since 1981, according to NRA statistics. This strong growth pattern is expected to continue into 1999.
Technology is also a hot topic as studies show 45% of quick-service operators plan to allocate a larger amount of their budgets to technology in 1999. More and more restaurant operators now have access to a personal computer, which they are using for sales analysis, and inventory and accounting tasks.