Forecasting the Future: Insights on the Economy and Global Restaurant Industry Trends
When one thinks about global food service brands, Coca-Cola probably comes immediately to mind. With its rich history spanning over a century and its dynamic involvement in communities around the world, this company truly has cemented itself as a revolutionary thought leader. During the fourth-quarter State of the Industry webinar, Black Box Intelligence (formerly TDn2K) co-founder and chairman Wally Doolin had the opportunity to chat with two leaders from the Coke team. Robert Jeffries, vice president of strategic initiatives, and Roy Jackson, senior vice president of industry affairs, shared their outlook for the food service industry heading into 2018 and beyond.
Wally: Robert, knowing Coke has many resources including your economist, Carlos Herrera, how do you view the all-important fourth quarter and 2018 in terms of the economy?
Robert: There’s a lot of conversation around what’s going to happen. This is where I need to give a nod to our forward-looking statement. As Carlos always says, “The fact that I’ve been wrong in the past doesn’t mean I’m gonna be wrong in the future, but it is likely to be.” Economic forecasting is not an exact science, so please don’t rely on what I say. Use your counsel to guide what’s going to happen over the next 15 months. The great news is, according to Carlos, the food service industry is expected to do better in 2018 supported by better traffic. He’s very optimistic about what’s going to happen not only in the fourth quarter but within 2018.
With regards to Q4 2017, as we’ve seen, the recovery from the hurricanes has been surprisingly fast. Production in the Gulf Coast refineries and chemical plants is mostly restored, and when that happens, when production rebounds, rebuilding can start. So, his expectations for the growth of the economy in Q4 are between 2.2 and 2.5 percent. It’s supported obviously by consumer spending, which we saw is on the rise. Unemployment is lower and we’re also seeing rises in both incomes and household wealth, and that points to an optimistic outlook. So, he expects the food service industry revenues to grow between 1.5 and 2 percent in Q4 2017.
When we go to 2018, with no significant challenges to the ongoing evolution and momentum we’re seeing, the economy is expected to grow 2.5 percent. That’s a big statement because a lot can happen in the meantime, but again he is optimistic about this growth throughout 2018. More good news for the food service industry is that the “food away from home” versus the “food at home” inflation has started to subside, and traffic is recovering. So, in 2018, he expects about 2.8% growth in revenues. Traffic is also expected to be a little bit better than average, about 0.6 percent, and average check growth to be holding around 2.2 percent.
Wally: Roy, after the time you’ve spent in Dubai this week at the Global Restaurant Leadership Conference, you are fresh with ideas about our industry and its global presence. Can you share a little of the perspective you’ve developed over the past few days?
Roy: This has been the second opportunity to be a partner for the Global Restaurant Leadership Conference. This conference brings global leaders together so we can get the benefit and wisdom of how we can help restaurants in the U.S., Middle East, Asia, and Africa to grow. It is one-of-a-kind and invitation-only, which is so that we can get the right individuals partnered to help develop concepts overseas. This year, we had over 1450 participants from 60 different countries, including 800 operators and 325 brands.
Of the 325 brands represented in the room, probably 60 percent of them were from the States. They represented international franchisees and U.S. franchisors. Franchisors were looking to partner with concepts that they otherwise would not have the opportunity to spend time with. This created a very rich environment for the C-suite, which represented about 60 percent of the 1450 individuals in the room, to network, learn, and exchange ideas about what’s going on in the restaurant industry, both in the U.S. and globally.
Overall, there was an acknowledged optimism about the future as well as a solid recognition of all the headwinds and challenges operators are facing, depending on whether you’re in the Middle East/North Africa or Southeast Asia. These challenges could be geopolitical, economic, environmental, etc. So, this opportunity was really what got people excited to attend a conference like this. They were excited to learn from each other and figure out how to take a U.S. concept, Indian concept, or South African concept and grow that in other parts of the world.
Wally: One of the observations I’ve gained from doing international business is that the U.S. is the strongest exporter of hospitality brands in the world. Would you agree, Roy?
Roy: There’s no question that it is. Our CEO, James Quincey, eloquently shared this week why partnerships are particularly key to taking advantage of opportunities for U.S.-based customers or companies who want to expand overseas, particularly since there’s been a success in doing it. The incubation of hospitality and restaurant concepts tends to be of a greater number here in the States. That notwithstanding, there is also optimism that comes from the fact that you have operators and concepts who developed in other parts of the globe, that are looking to expand outside of their borders either regionally or by going across whichever pond is closest.
With the landscape changing dramatically, these concepts could look very different in the future, particularly with the demographics of the new consumers, what they look like, and what they are asking for. Whether it’s millennials or baby boomers, companies are looking to different concepts to satisfy their consumers’ needs and get their products in their customers’ hands in the way that they want them. Whether it has to do with premise execution, delivery, or meal replacement at home, these are all ideas that describe opportunity. One interesting global growth trend now is the “café culture” tearing across the world. Consumers see cafés as a meeting place and social environment, and that is complemented by social media. Now people utilize these spaces, and the way that they do is bolstered by social media. Coffee cafés are a fairly effective location to do that. So, in short, we are the big exporter, but there is now a lot of opportunity across borders and for new concepts coming to life that have opportunity in the states as well.
This conversation has been edited and condensed for clarity.