US & Global Economic Impact Analysis and Forecasts

Freedonia analysts and economists are sharing their insights on how major events are impacting different parts of the US and global economies.

Off-Premises Dining: The New Normal

Prior to the COVID-19 pandemic, the idea that a restaurant (save for the fast-food segment) would devote serious resources to expanding its operations in the take-out sector would be treated with derision. Why, after all, would a restaurant operator choose to sacrifice valuables in appetizers, beverages (particularly potent potables) and dessert? However, the COVID-19 has dramatically changed how the restaurant industry looks at carry-out: 

  • Many consumers are leery of eating in a restaurant (as of the June 2021 edition of the Freedonia Group National Online Consumer Survey, 52% of respondents still noted that they were eating less often indoors in restaurants because of the pandemic), but still desire their favorite dishes from local eateries.
  • A number of states and localities have loosened liquor laws, allowing the to-go sale of alcoholic beverages – thus reserving a source of revenue for many casual restaurants.
  • While dining apps (e.g., UberEats, DoorDash, and Grubhub) have become increasingly popular (as of the June 2021 edition of The Freedonia Group National Online Consumer Survey, 27% of respondents noted that they were ordering a meal from a restaurant via a 3rd party app more because of the pandemic), the fees they charge can add greatly to the cost of a meal.
  • Restaurants have expanded curbside delivery as a way to recapture market share (as of the June 2021 edition of The Freedonia Group National Online Consumer Survey, 34% of respondents noted that they were ordering carry-out from a restaurant more often because of the pandemic).

A number of restaurant chains have announced plans to expand curbside delivery options, refurbish restaurants to exclusively cater to drive-through customers, or launch new operations specializing in pickup and delivery. In most cases, this involved adding kitchen capacity dedicated to carry-out and delivery orders as kitchens were not equipped to handle off-premises orders along with a busy period of on-site dining. However, the space near the entrance meant for greeting and seating diners was not enough to also accommodate delivery and carry-out operations.

Thus, the recent news by TGI Friday’s that they would be developing a small format restaurant devoted to curbside and off-site delivery was of interest. Given the chain’s reputation as a leading casual sit-down restaurant, this entrance into the world of off-site dining can be interpreted to indicate that this will be a permanent change to US dining habits – even after the threat of the pandemic recedes.

For more information and discussion of opportunities, see The Freedonia Group’s extensive collection of off-the-shelf research. Freedonia Custom Research is also available for questions requiring tailored market intelligence.

  Covid-19      Food & Beverage      Services    

Corporate Deal Making Still High as Major Conglomerates Announce Breakups & Realignments: Toshiba, Johnson & Johnson, General Electric, DuPont… & More

The business world experienced a wave of change this past few weeks as four conglomerates announced plan to break up into a number of smaller firms:

  • Toshiba released plans stating that it would divide into three firms: one focused on infrastructure and construction operations, a second concentrating on electronics, and a third devoted to memory storage solutions.
  • Johnson & Johnson announced that it would separate its consumer products division (maker of Band-Aid bandages and Tylenol pain reliever) from its medical device and prescription drug operations.
  • General Electric – perhaps one of the most famous of these conglomerates – stated it would complete a long chain of divestitures and separate its healthcare, aviation products, and power systems businesses.
  • DuPont, which has been reorganizing over the past two years since its separation from DowDuPont (other surviving units include Corteva and Dow Chemical), announced it plans to sell much of its Mobility & Materials segment, including the Engineering Resins and Performance Resins lines and its stake in the DuPont Teijin Films joint venture. At the same time, it reported it would buy Rogers Corporation, a key suppliers of high performance materials in the electronics market.

The reasons for these breakups vary. For Johnson & Johnson, the decision was based on the fact that the divisions had evolved into different focuses and customer bases (consumers in the one, healthcare professionals in the other) and a separation was a logical choice. DuPont is also reorganizing toward a high growth portfolio. In DuPont’s case, it’s leaning into next generation solutions in electronics, water, protection, industrial technologies, and automotive. For GE and Toshiba, the moves were done after years of concern that by keeping their varied units together, shareholders were not receiving as much of a return on their investments as they should have been; thus, these moves were welcomed by the investor community (if not by the more tradition-minded).

Will the market see more of these moves? It is a distinct possibility; companies tend to cycle between eras of building up portfolios and eras of contracting to a reshaped view of core competencies. Additionally, as some investors are looking for more exotic opportunities – Bitcoin, crypto, SPACs, shorting – some companies will decide that it might be worthwhile to create their own buzz and separate into two or more firms, thus unlocking shareholder value.

Others, though, may continue to see value in diversification – especially as the US and global economy tries to navigate a challenging world of COVID, inflation, and supply chain difficulties.

For more information and discussion of opportunities, see The Freedonia Group’s extensive collection of off-the-shelf research. Freedonia Custom Research is also available for questions requiring tailored market intelligence.

  Industry Studies      Services    

Shortage of Truckers Among Causes of Supply Chain Issues Across the US

Recently we posted on this page an article about the rising costs of so many things, from groceries and consumer goods to building materials. While there are a number of factors driving up costs, one that is seldom appreciated by the consumer is the trucker shortage – the people who drive the trucks that carry products across the US. This dearth of drivers is a key reason why store shelves are lacking inventory – in many cases, there is simply no one to take finished products to warehouses and retailers.

Indeed, while this is not a new concern, the COVID-19 pandemic has exacerbated the shortage of long-haul truckers in the US, precisely at a time when more of these professionals are needed to cope with the surge in e-commerce and deliveries of foodstuffs and other items. Key causes of the trucker shortage include:

  • low wages relative to other traditionally “blue-collar” jobs
  • long hours and frequent periods of absence from family and friends, which make it difficult for people to remain in the industry
  • frequent delays in unloading and loading trucks, which can limit the amount of time drivers can actually spend on the road – drivers are generally paid by the mile, so these delays literally cost drivers time and money
  • frustrations about a lack of safety protocols (such as access to masks and PPE) during the COVID-19 pandemic
  • the lack of younger truckers to replace older drivers retiring out of the industry
  • competition from last-mile and short-haul driving jobs that have boomed along with e-commerce and food delivery, but often require less training and definitely require more regular scheduling and/or less time away from home

With no immediate solution to this shortage of long-haul professionals on the horizon, logistics professionals will continue to look for creative solutions while manufacturers, store managers, and – ultimately – the US consumer will continue to experience higher prices and delivery delays.

For more information and discussion of opportunities, see The Freedonia Group’s extensive collection of off-the-shelf research. Freedonia Custom Research is also available for questions requiring tailored market intelligence.

  Automotive & Transport      Covid-19      Services    

Mergers & Acquisitions Are Booming in 2021: Key Factors Driving Increased Activity

M & A activity has been very busy this spring. Across a wide variety of industries, we’re seeing a range of announcements from market leader combos to roll-ups of smaller, regional operations. But what’s behind this rise in activity?

Here are a few key factors driving acquisition and divestiture activity across the economy in 2021:

  • Owners of smaller firms are looking to retire after their businesses’ survived the COVID-19 pandemic (or in some cases, these businesses struggled and owners did not want to rebuild).
  • Certain industries with high pandemic-era sales (e.g., construction goods suppliers, home improvement distributors/retailers, packaged food companies, grocers, lawn and garden equipment and supplies firms) are flush with cash and high stock values and are looking to expand.
  • Pent-up interest from the limited activity of 2020, as transactions that were planned or considered pre-pandemic were put on hold due to economic uncertainty or the difficulty of completing due diligence when you aren't traveling. Some of these previously planned transactions are now going through.
  • Expectations of higher tax rates are leading some firms to cash out now or to make shifts that put them on better footing.
  • SPACs (special purpose acquisition companies) are being increasingly used for acquisitions to expand existing public or private companies.
  • Companies are reevaluating their business operations in the post-pandemic era and are sometimes making changes to what they see as their core operations, or are building on key capabilities that have grown over the course of the pandemic.

Freedonia Group analysts are keeping watch across a wide variety of industries for changes that portend market movements and shifts in the competitive environment.

For more information and discussion of opportunities, see The Freedonia Group’s extensive collection of off-the-shelf research. Freedonia Custom Research is also available for questions requiring tailored market intelligence.

  Chemicals      Construction & Building Products      Consumer Goods      Covid-19      Energy & Petroleum      Food & Beverage      Industrial Components      Machinery & Equipment      Packaging      Plastics & Other Polymers      Services      Textiles & Nonwovens    

What Tells You Things Are Heading Back to “Normal”?

Instacart recently released a blog entry talking about something they are calling “the Pudding Pack Index.” The company suggests that increased orders of classic lunchbox items like pudding packs, granola bars, and fruit snacks are solid indicators that the US economy is returning to normalcy – a sign that kids are going to school or camps, that families are going on vacations (particularly road trips), and parents are returning to their workplace.

Our economy is full of such informal modes of evaluation. For instance, a former FEMA director suggested the “Waffle House Index” – or the ability for local Waffle House restaurants to be operating – is a good indication of the severity of storm event.

So what other core indicators might we look at now that could portend a return to normal?

  • Vaccine Rates: That’s an obvious one…vaccinated people are more comfortable resuming their previous habits and can better do so safely, even if the adjustment may not be rapid due to newly formed habits or ongoing concerns about variants or unvaccinated family members
  • Brick & Mortar Store Traffic: Now, many people are likely to retain their online shopping out of convenience and new habits, but returns to in-person shopping indicate normalization
  • Office Occupancy Rates: The return – at least partially – of workers who shifted home during the pandemic would boost traffic at foodservice restaurants and aid the sagging commercial real estate industry
  • Miles Driven: Increases here would indicate more people commuting to work and more people traveling
  • Improvements in Retail Apparel Sales: Once we decide to set aside our pandemic athleisure and start buying fresh outfits for special events, evenings out, and professional looks, we’re planning for a life away from our couches and home offices

For more information and discussion of opportunities, see The Freedonia Group’s extensive collection of off-the-shelf research. Freedonia Custom Research is also available for questions requiring tailored market intelligence.

  Automotive & Transport      Construction & Building Products      Consumer Goods      Covid-19      Food & Beverage      Packaging      Services      Textiles & Nonwovens