Challenging Times Ahead

I don't care how good an operator you are, I see lots of clouds on the horizon. Consumer tolerance for higher costs are directly proportional to their ability to absorb increased costs. The increasing costs of every day living- fuel, energy, food, health insurance, taxes- without a corresponding increase in wages, will force people to limit discretionary expenditures. The result for our businesses is that if you are dependant on discretionary spending of the middle class for your revenue growth challenges are on the way. For the food distributor: restaurant spending for middle income families will decline. My prediction is that mid-casual dining's growth will continue to be stymied. Fast food (low cost dining) should continue to grow and white table cloth dining- catering to business and the wealthy should remain stable. For the distributor, customer's will be very cost conscious and shop business more readily than in the past. That means margins for the distributor will be threatened. Cutting costs and aggressively pursuing competitor's business is the prescription for success in 2008.