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Quarter 1 | Winter 2025
Restaurant Supply Product Pathway Summary: The ILA and USMX have reached a tentative agreement on a new six-year ILA- USMX Master Contract
Manufacturing
Ground Logistics
Ocean Logistics
Raw Material Availability
Port Worker Strikes
Amazon Strikes
Cost
Armed Conflict
Diesel Fuel Cost
Tariffs
Adverse Weather
Warehouse Inventory
The International Longshoremen's Association (ILA) and The United States Maritime Alliance (USMX) reached a tentative deal - subject to union member review and ratification - that will avert a strike at East and Gulf Coast ports scheduled for January 15. Container ship berths appear tighter than normal at the start of 2025 and Freight of All Kind (FAK, general freight rates) increased several hundred dollars in late December. Spot container rates from Asia to the US West Coast rose 8% as December ended. Additional factors driving rate increases include carriers frontloading ahead of Lunar New Year, strike and tariff disruptions. FreightWaves, Freightos
Reduced crude oil prices and increased production are key factors contributing to the lower forecasted prices for diesel fuel in Canada and the US through the course of 2025. Signaling holiday season system desynchronization, wholesale inventories decreased 0.2% to $902 billion late in Q4 as retail inventories increased by 0.3% to $828 billion in the same period, according to advance data from the Census Bureau. Wholesale inventories rose 0.9% from a year earlier, while retail inventories soared by 7.2% year over year.
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Q1 2025 Market Update
ACR©2025
Global Supply Chain - Geopolitics Summary: Labor Strife, Trade Policy, War & Consumer Demand key factors shaping ocean freight costs
President-elect Trump has suggested a variety of new tariffs on imports; Associated Press, Factcheck.org • General Tariffs - 10% to 20% on all imports. • China-Specific Tariffs - 60% on goods from China. • Retaliatory Tariffs - enacted if other countries impose higher tariffs on U.S. exports; if a country places a high tariff on American goods, U.S. response would be an equivalent tariff on imports from that country. • Sector-Specific Tariffs - high tariffs on specific companies and sectors including a 200% tariff on John Deere exports if the company moves production to Mexico and a 100% tariff on Mexican-made goods. The likelihood of President-elect Trump's proposed new tariffs taking effect is a topic of significant debate. He has indicated that he plans to use executive authority to impose tariffs, much like he did during his first term. The U.S. Constitution grants Congress the power to impose tariffs and Congress has over time delegated some of this authority to the president, allowing for executive action in certain circumstances. Experts point to Trump’s belief in the effectiveness of tariffs, his pace of action during his first term and the fact that for 2025 and 2026 at least, he will be working with a Republican House and Senate, setting a scene that
suggests tariff actions may come early in the new administration. Other experts expect trade policy changes under Trump to be meaningful, but short of some of the more dramatic proposals being mentioned in the run up to the inauguration. CBS News, Associated Press, Goldman Sachs Ongoing attacks by Houthi rebels on container ships in the Red Sea are likely to continue affecting operations and freight rates in the first half of 2025 and beyond. Projections of when and how the Houthis will maintain their campaign of disruption associated with the war in Gaza, have not borne-out after more than 15 months of conflict and most shipping bound for the west has had to continue routing around the Cape of Good Hope, adding a week to 10 days to every voyage. Consensus among experts is that a sustainable solution will require international diplomatic efforts rather than solely relying on military interventions. Engaging the Houthi rebels in negotiations and addressing the underlying political issues in Yemen will be crucial, a process that will likely require years of sustained effort. Chartered Institute of Export and International Trade Working in favor of importers and consumers is expectation that the global shipping market will see an 8% increase in capacity but only a 3% increase in demand, easing some system constraints. FlexPort
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Q1 2025 Market Update
ACR©2025
The General Economy Summary: Pertinent to Restaurants, general economic confidence dipped late in ’24, but indications are 2025 will be steady
The Conference Board said Dec. 23 that its consumer confidence index fell back for the month to a lower-than-projected 104.7 from 112.8 in November. • The Present Situation Index—based on consumers’ assessment of current business and labor market conditions—fell 1.2 points to 140.2. • The Expectations Index—based on consumers’ short-term outlook for income, business, and labor market conditions—tumbled 12.6 points to 81.1, just above the threshold of 80 that usually signals a recession ahead. December’s fall in confidence was led by consumers over 35 years old; consumers under 35 became more confident. Among income groups, the decline was concentrated in consumers with household earnings between $25K and $100K, while consumers at the bottom and top of the income range reported only limited changes in confidence. Consumers had been feeling increasingly confident in recent months, spending more in the run-up to the all-important holiday shopping season. The consumer confidence index measures both Americans' assessment of current economic conditions and their outlook for the next six months. The proportion of consumers expecting a recession over the next 12 months remained stable. The Conference Board Perhaps driving soured consumer sentiment is that both the US Federal Reserve and Bank of Canada indicated in December they will
be taking a cautious approach to interest rate adjustments in 2025 after making a series of rate cuts in the second half of 2024. US Federal Reserve effective rate stands at 4.33%, Canada’s at 3.25% and both countries’ monetary governance boards remain focused on reducing inflation rates that stubbornly linger several basis points above the shared 2% target level. CBS News, Investopedia, Canadian Mortgage Trends Ground transportation of foodservice supplies across North America are driven largely by the cost of diesel fuel and the good news is that prices at the pump in Canada and the US keep declined through 2024 and are predicted to continue to slide lower in the coming year. Fuel prices, both diesel and gasoline, are of course a fundamental driver of overall general economic health, as well. • Diesel fuel prices in Canada declined throughout 2024 - reaching a 14-month low by September - and prices remained stable through year-end. Forecasts for 2025 shows prices potentially increasing slightly, peaking in late spring or early summer 2025, then trending lower. Average prices per liter are projected to be around CAD 1.50. Kalibrate.com • Similarly in the United States, diesel prices stayed on a downward trend in 2024, averaging USD 3.46 per gallon by December. The U.S. Energy Information Administration (EIA) projects that diesel prices will average $3.61 per gallon in 2025, continuing the downward trend from 2024. InTek Freight Logistics
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Q1 2025 Market Update
ACR©2025
Foodservice Industry Outlook Summary: Modest single digit same-store traffic growth is forecast for US and Canadian restaurants in the new year and sales revenue is expected to rise only slightly; Dining Experience, Sustainability and Service Quality are key to remaining competitive
• Health-Conscious and World Flavor Menus - consumers are seeking healthier dining options, leading to an increase in menu items that cater to dietary preferences, including plant-based and low-calorie options, as well as flavors and tastes from different parts of the globe. • Labor Market Management - staffing remains a significant challenge, with many restaurants reducing service hours or closing on days they would normally be open. • Changing Dining Habits and Preferences – patrons increasingly seek personalized and unique dining experiences, from novel and exotic menu choices to full-emersion dining events with elements designed to satisfy all human senses, the newly coined phrase being “ Eater -tainment.” • Adoption of Automation and AI - chatbots handling reservations and robotic chefs preparing meals, technology is enhancing efficiency and reducing labor costs but it’s crucial to balance automation with personalized customer service. • Digital Ordering and Delivery Platforms - online ordering and delivery services continues to reshape the industry. Patrons prefer digital platform convenience, prompting restaurant investment in user-friendly apps and delivery service partnerships; focus on maintaining food quality during delivery and managing the logistics of off-premise dining are key aspects for ACR chain and distribution customers.
Overall, the restaurant supply distribution industry is navigating a complex landscape with both opportunities and challenges. Competition is fiercer than ever for highly-contested patron dollars and restaurant operators are being forced to evaluate complex and expensive investments in technology, menu formats, and labor to gain and maintain traction. Key trends that stand out for organizations focused on staying agile and responsive to consumer demands in 2025 include the following: Black Box Intelligence, KPMG, TRG Restaurant Consulting, CSP Daily News • Inflation and Pricing Strategies - Inflation continues to impact menu pricing and consumer spending and operators are grappling with higher labor and food costs, leading to a 4% increase in menu prices in 2024. “Meal Deals” will continue but chains will likely try to normalize back to standard pricing formats where possible. Notably, the Convenience Store industry joined the meal-deal trend in 2024 in response to competitors in the Quick Serve restaurant segment. • Digital Enablement - restaurants are increasingly investing in digital capabilities, including online ordering systems, delivery services, and digital marketing. • Sustainability - emphasis on eco-friendly practices, such as reducing food waste and using sustainable packaging, continues to grow.
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Q1 2025 Market Update
ACR©2025
Key Takeaways – Q1 2025
• Technological Innovations: Advancements in AI, automation, and voice ordering will enhance the efficiency and personalization of takeout services. Smart kitchens, drones, and robots for delivery could begin to play a role in enhancing convenience and reducing costs. • Economic Factors: While economic pressures may affect consumer spending, the convenience of takeout may still be viewed as an affordable alternative to dining out, especially in urban areas where dining costs can be high. The US and Canadian economies have performed with stability and steadiness through the post-Covid and post-supply chain crisis era of inflation recovery and normalization. This resiliency seems likely to continue, with the ability to adapt to most anything thrown their way. This is not to say that 2025 won’t present obstacles; it certainly will, whether due to trade warfare, real warfare, labor strife, new variants of old diseases, or other challenges that crop up, and it will be up to the innovative, savvy Operators and Distributors that ACR proudly serves, working in collaboration with ACR Representatives to chart courses through the choppiest seas.
While uncertainty about tariffs, strikes, and geopolitical strife are unsettling, it must be noted that the outlook for restaurant takeout meals as the new year dawns is expected to remain strong due to a compelling combination of evolving consumer behaviors and technological advancements; • Continued Demand for Convenience: Busy lifestyles and increasing reliance on digital platforms will continue to fuel the demand for takeout. Consumers are seeking fast, convenient options, and many prefer the ease of ordering online or via apps. • Growth of Delivery Services: Third-party delivery platforms will likely see continued growth, further embedding takeout as a standard dining option; UberEats, DoorDash, and Grubhub each now advertise on every NFL game! This phenomenon is bound to expand, supported by improved logistics and expanded restaurant partnerships. • Health and Sustainability Focus: There will be an increasing demand for healthier, sustainable, and diet-specific options in the takeout sector. Consumers will seek more plant-based, organic, and eco-friendly packaging alternatives.
Q1 2025 Market Update
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