Sales of food away from home expanding - growth of foodservice market

The foodservice market continues to grow - from $151 billion in sales in 1984 to $273 billion in 1994 (excluding sales tax and tips). Over the decade, such sales of food away from home increased an average of 5.6 percent annually, or about 2.5 percent per year when adjusted for inflation. That compares with a 0.4-percent inflation-adjusted annual rise in retail food sales (food at home).

Growth in the foodservice market is not unexpected, given that today's time-pressured consumers do not always have the time to plan, shop, cook, eat, and clean up a meal prepared at home. Convenient, value-priced foodservice has become a popular alternative. Higher disposable income due to two-earner families, more women in the workplace, and less leisure time are all reasons for increased sales of food away from home, particularly fast food.

Commercial establishments constitute the largest sector of the foodservice market, accounting for 78 percent of industry sales in 1994 (table 1). These establishments prepare, serve, and sell meals and snacks for profit to the general public. The commercial foodservice sector [TABULAR DATA FOR TABLE 1 OMITTED] [TABULAR DATA FOR TABLE 2 OMITTED] includes separate eating places - full-service restaurants and lunch-rooms, fast-food/quick-service outlets, cafeterias, and caterers - and foodservice operations located in other facilities, such as lodging places, recreation and entertainment facilities, retail hosts (like department stores and limited-price variety stores), and separate drinking places.

About 22 percent of foodservice sales in 1994 came from noncommercial operators. These foodservice operations prepare and serve meals and snacks as an adjunct, supportive service in institutional and educational settings, such as schools, nursing homes, child daycare centers, and patient feeding in hospitals.

Fast Food the Largest Segment

Fast food accounts for the largest, and fastest rising, share of sales in the foodservice industry. Sales in 1994 reached $93.7 billion - outdistancing the $81.6 billion of receipts earned by full-service restaurants and lunchrooms. However, that has not always been the case. Up until 1987, restaurants and lunchrooms retained the largest share of sales [ILLUSTRATION FOR FIGURE 1 OMITTED]. Fast-food outlets more than doubled their sales over 1984-94 and captured an increasing share of separate eating-place sales - from 46 percent in 1984 to 52 percent in 1994 (table 1).

McDonald's is by far the leading foodservice chain, with $23.6 billion in 1993 sales from 9,283 domestic units and 4,710 outside the United States (table 2). Burger King, a subsidiary of Grand Metropolitan, PLC, is the second-largest chain in terms of sales ($6.7 billion), but ranks third in the number of outlets worldwide (7,121). PepsiCo's Pizza Hut is the largest pizza chain in the industry, with 10,433 outlets and $6.4 billion in sales.

These top three fast-food chains continue to expand their presence overseas. McDonald's recently opened in Hungary, Trinidad, and Bulgaria; Burger King in Israel; and Pizza Hut in China, Italy, and India.

Many fast-food chains are also establishing themselves in nontraditional sites, such as mobile kiosk operations, push carts, sports centers, and educational institutions. One force driving this expansion strategy is the concept of taking the food to the consumer.

Two other segments in commercial foodservice about doubled their sales from 1984 to 1994 - recreation and entertainment facilities and retail hosts. Increased food sales by gasoline stations, convenience stores, and miscellaneous retail stores contributed to the growth in retail hosts.

Noncommercial Segment Also Expands

Noncommercial foodservice sales grew 50 percent from $40 billion in 1984 to $60 billion in 1994.

Sales nearly doubled for college and university foodservice operations between 1984 and 1994 due to an increase in school enrollments. Vending sales rose as machines were placed in more (and new) locations. Transportation foodservice sales more than doubled, along with increased air, rail, and ship traffic. Sales increased in plants and offices by 80 percent and in elderly feeding programs by 69 percent.

However, sales declined in some noncommercial operations. Military foodservice sales dropped by 44 percent between 1984 and 1994 as the number of troops decreased. Sales fell 2 percent in hospitals during the same period.

The author is an economist with the Food and Consumer Economics Division, Economic Research Service, USDA.

COPYRIGHT 1996 U.S. Department of Agriculture
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