The U.S. Economy and Food: A Survey Part One

It is hard to miss. Everyone is discussing the poor economy and the recession, which helps it to become a self-fulfilling prophecy. Needless to say, in my circles there is much talk about the recession's effects on the food industry, especially after the shocking closing of Fiamma, a NYT three star restaurant in NYC, directly blamed on the economy. There is a feeling of foreboding throughout the industry and much talk of gloom and doom, but very little of a systematic approach examining this issue, at least that I am aware of. Although my approach remains anecdotal, I took it upon myself to reach out to nearly one hundred industry professionals across the United States and asked three questions:

1. How have you been affected by the economic climate?
2. What have you and your business done to weather the current economic climate?
3. What changes, if any, do you see coming down the road to effect your business and the food industry in general?

The responses I have received so far have been very interesting and surprisingly frank with some asking me not to identify them as they were discussing a potentially sensitive subject regarding their businesses.

Question 1
. The common theme is as one well known chef said, "we are seeing fewer number of covers and decreased check average.  Dessert and Appetizer sales are suffering as well." He also lamented, "investors are hard to find and many are being effected as the days come and are therefore forced to pull monies out of projects.  A pastry chef responded, "The restaurant has been affected by the things you read about everywhere: Less dessert ordering, being a pastry chef, that affects me directly, although sometimes sales have been better then normal! Go figure…" A chef from Chicago responded, "I am executive chef at a high volume upscale restaurant in Chicago and the thing that has changed the most in the last few months is banquet/private dining business. it has been decimated. Big companies are simply not having parties anymore. We had quite a few Christmas parties cancel this year. our regular dining is down somewhat but I've noticed people are still eating out but spending less. my check average has gone down slightly and a lot of my servers are telling me people are tipping less. People are shying away from high ticket items and buying less expensive main courses." A popular chef in NYC noted, "we have fewer reservations compared to last year, about 35% less, particularly with the early and late tables.  our average check decreased by 25%.  our "no shows" increased by 10%." Another chef in Boston replied, "We experienced a drastic reduction in corporate business in the last quarter of 08, many Holiday functions canceled, some of them under contract. We specialize in Holiday Functions, Corporate Teambuilding through cooking etc. Biz was 50% less  than year before." Wine sales are an area that many chefs agree has seen reductions in spending on the part of consumers. One wine importer confirmed this impression, stating, "As a wine importer, I have been affected by restaurant slow downs and closings. Many restaurants are off by 25-50% or even more. And the closings speak for themselves. Less people in the restaurants mean less wine sales. Pretty simple. I've also been affected by people buying less expensive wines — in both restaurants and wine shops — where margins are tighter (for me anyway)." Another chef, added perhaps the most dire assessment of the situation, ""Due to the sensitive nature of financial information I can only say that most fine dining operators will admit to being down about 20%. The real truth is that most are down between 35% and 55% in total sales. Scary times indeed."

Not all has been doom and gloom, however. Philip Preston, President of PolyScience, the company that makes much of the innovative new cooking equipment on the market in the United States such as thermal circulators, water baths for sous vide cooking novel food smoking devices, etc.  prefaced his answer to the questions  "by saying that my views and approaches are not at all typical of what I hear is happening in the industry. I believe that bucking trends can offer great opportunities for PolyScience." He added, "We have felt no impact of the economic downturn yet but I do expect that we will. Generally the greatest effect has been a sense of fear that people have that provides them with justification to hunker down. Not to downplay the seriousness of the situation, I have seen plenty of good hard working people suffer. We are fortunate that our diverse market segments are not as seriously impacted as others." Depending on the market, some restaurants have continued to be very busy. Noca, the new restaurant in Phoenix has continued to be quite busy, taking advantage of "the season" to continue to advance their market. Eliot Wexler, the principle owner and general manager of the restaurant, told me that this past Friday, they did their most covers ever.

The bottom line though is that the effect of the current economy on the restaurant industry seems to be quite real. Unless the restaurants are able to take steps to stanch the bleeding, it is quite likely that the rate of closures will increase even taking well known names.

To be continued…

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