511 - Market Update Q3 2025

Summary: Foodservice Industry Insights The U.S. foodservice sector is dealing with labor shortages, inflation, and disrupted supply chains, even as consumer demand returns and operators adapt with tech, alternative sourcing, and menu flexibility.

• Supply Chain Disruptions: Global conflicts, trade restrictions, and climate-related events have led to unpredictable availability and fluctuating prices for essential ingredients. These disruptions have forced restaurants to adjust menus and seek alternative suppliers to maintain operations. • Consumer Behavior Shifts: Today's diners are more value- conscious and health-oriented. There's a growing demand for plant-based options, allergen-friendly menus, and sustainable practices. Additionally, the rise of fast-casual and hybrid dining models reflects a preference for convenience without sacrificing quality. Despite these challenges, the foodservice industry is projected to reach a market value of $5.2 trillion globally in 2025, with the U.S. market contributing significantly to this growth. Operators who adapt to the evolving landscape by embracing technology, streamlining operations, and aligning with consumer preferences are poised to thrive in this dynamic environment. (Culinary Coverage) In summary, while the U.S. foodservice industry faces a myriad of challenges in summer 2025, opportunities exist for those willing to innovate and adapt. By addressing labor shortages, managing rising costs, navigating supply chain complexities, and meeting shifting consumer demands, restaurant operators and distributors can position themselves for sustained success.

As of summer 2025, the U.S. foodservice industry is navigating a complex landscape marked by persistent challenges and emerging opportunities. While consumer demand shows signs of recovery, restaurant operators and foodservice distributors continue to grapple with labor shortages, inflationary pressures, supply chain disruptions, and evolving consumer expectations. Key Challenges: • Labor Shortages and Immigration Policies: The restaurant sector remains heavily reliant on immigrant labor, with over 20% of workers born abroad. Recent immigration enforcement actions and policy changes have intensified labor shortages, making it increasingly difficult for operators to staff their establishments adequately. The revocation of Temporary Protected Status for certain migrant groups has further strained the labor pool, particularly in the hospitality industry. (ft.com) • Rising Operational Costs: Operators are contending with escalating costs across multiple fronts: • Food Prices: Although inflation has moderated, food costs continue to rise, with the USDA projecting a 2.2% increase in 2025. • Labor Expenses: Minimum wage hikes in 21 states and 48 municipalities have added to payroll burdens. • Tariffs: Newly imposed tariffs on imports from countries like Mexico, Canada, and China are expected to drive up prices for key ingredients, including avocados, baked goods, and seafood.

Q3 2025 Market Update

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