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Prepared Foods Are Set for Another Good Year

Prepared Foods Are Set for Another Good Year

The economy's slow climb out of the recession has been welcome news to the nation's ailing restaurant industry. Facing job losses, falling home values and uncertainty about the future, consumers slashed discretionary spending, and many saved money by dining out less and eating at home more often.

The result? In 2008, restaurant sales declined 1.2%. In 2009, sales fell another 2.9%, according to the National Restaurant Association.

The association has higher hopes for 2010. The group's annual industry forecast, released last week, projects that U.S. diners will spend a record $580 billion at U.S. foodservice establishments this year. After adjusting for inflation, this would essentially mean a flat year for the industry.

However, one projection from the report should encourage supermarket retailers. The association expects retail host restaurants — such as prepared-food departments — to grow almost 5% this year.

Technomic, a restaurant industry research consultancy in Chicago, is predicting a more difficult year for restaurants. Last week, the group revised its own 2010 foodservice industry forecast downward, projecting a total sales decline of 1.6%. But it, too, believes that prepared-food departments will buck the trend, growing 2.2% this year.

The reasoning is simple. Consumers are still looking for value, and supermarket foodservice has improved by leaps and bounds during the past decade. These meals and sides are convenient, and many shoppers view them as healthier than fast food and less expensive than comparable restaurant takeout.

Plus, shoppers don't have to tip, and they have more control over the portion sizes, Bob Goldin, executive vice president of Technomic, told SN.

Goldin said that much of the growth in prepared foods is being led by retailers such as Whole Foods, Wegmans and H-E-B Central Market — chains that have made significant investments in their foodservice operations. And, he believes that ongoing investment and innovation is the only way to continue growing these departments. After all, this is the restaurant industry that retailers are competing with.

During the downturn, conventional wisdom has been that declines in restaurant traffic have benefited food retailers. Shoppers are buying more groceries and cooking at home more often to save money. So, it would be reasonable to expect retailers to take a hit when the economy improves and the restaurant industry is on the mend.

This still could be the case. Consumers are still struggling, and these forecasts for growth may not come to fruition. But, it's encouraging to view these departments through the eyes of restaurant industry analysts. During a downturn that left hardly any businesses unscathed, they believe that supermarket foodservice managed to hit all of the right notes with consumers.

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