Consumer Markets – Food Services

Q3 2022: Mergers and Acquisitions Trend Report

Industry Overview

• The outlook for the U.S. Food Services Industry remains positive. Growth has been attributed to increases in consumer spending, domestic and international travel, and
  per capita disposable income.
• Food services have experienced price inflation for food, labor, and utilities in 2022. Since 2020, the prices of milk and red meat have increased from 19.6% to 24.1%, respectively, further increases would contribute to a decline in revenue for industry operators.
• Key players are Yum Brands, Marriott International, Hilton Worldwide Holding, Starbucks, and Darden Restaurants.
• In 2022, sector employment is anticipated to increase to 17.0 million workers.

Key Industry Trends

• Consumer preferences have shifted toward healthy dining choices and cooking at home, a trend intensified by the pandemic. The sector has experienced growing levels of competition from home delivery food subscriptions, which encourage more people to cook meals at home, limiting restaurant spending.
• B2B profit is important for this sector, as businesses represent the second-largest market for food services. As companies become increasingly profitable, they are more likely to spend on client dinners, meetings, lunches, or
  business travel and accommodations.
• Increases in disposable income benefits the food services sector, as individual consumers account for more than 80.0% of the market. Higher-income individuals tend to frequently request fine dining and higher-end services.

Recent M&A Transactions

Historical Performance

• Decreases in demand and increased dining regulations due to the pandemic has resulted in a drop in restaurant profits, which are expected to account for 8.0% of revenue in 2022, down from 9.5% in 2017.
• The Food Service Industry revenue has increased at an annualized rate of 5.2% to $1.4 trillion, over the five years to 2022, including growth of 33.9% in 2022 alone.

Future Industry Growth

• Consumer preference for health-conscious foods has forced providers to use more expensive, premium ingredients. These expenses have been passed along to the customer, resulting in an increase in consumer spending. This trend is expected to persist and drive industry profits over the next five years.