Food Service Sector Hard Hit by Hurricanes; Long-term Growth Opportunities Still Exist

Matt Fannin, Merrill, Thomas A.  |  6/29/2007 6:51:44 PM

News Release Distributed 06/28/07

Louisiana’s food and fiber service industries were heavily affected by hurricanes Katrina and Rita. Consisting primarily of full-service and fast-food restaurants, the service industries lost 4.2 percent in value-added.

Those industries dropped from $3.06 billion in value-added in 2004 to $2.92 billion in 2005.

Value-added is the difference between the value of the product sold and the cost of materials and services needed to produce the product. For food and fiber services, a large proportion of this value-added is used to pay wages and salaries of employees who work in the sector. Consequently, this reduction in value-added resulted in a loss of 2,705 jobs.

"The food service sector was hit especially hard by Katrina and Rita" said Dr. Matthew Fannin, an agricultural economist with the LSU AgCenter. "What hurt most about the reduction in the food services sector was the loss of jobs. The job loss was almost as large as all the food and fiber product sectors combined."

Even more short-term challenges remain for the food service industry, according to Fannin.

"The biggest short-term challenge to Louisiana’s food service industry is to survive the downturn in population until residents return," he said, adding that the second challenge is for the state to retain as many food service establishments as possible until its tourism sector rebounds to near pre-storm levels.

"Louisiana’s food service industry thrives off a robust tourism economy," Fannin said. "Tourism’s rebound, especially in New Orleans, will benefit this sector."

But the longer-term prospects look much brighter for the food service sector, according to Fannin, who explained the percentage of food consumed away from home has increased as a proportion of the total household budget and is projected to continue to do so in the coming decade.

"According to recent report by the U.S. Department of Agriculture’s Economic Research Service, per-capita spending on fast food is expected to increase by 6 percent between 2000 and 2020, and full-service restaurants are expected to grow by 18 percent during the same period," the LSU AgCenter economist explained.

Officials say much of this change is a result in a higher proportion of single-parent families and the increasing number of baby boomers becoming "empty nest" households as their children leave the home to attend college and enter the workforce. Both of these demographic trends support a growing food service sector, Fannin stressed.

"If the (food service) establishments can survive the next three to five years while our state transitions out of the hurricane economy, the future looks bright for the food service industry" Fannin said.

To learn more about how agricultural commodities are being transformed into higher value-added food and fiber products, visit www.lsuagcenter.com. (Type B-886 in the search box to see the research bulletin from which this material is drawn.) You also can see information on a variety of topics ranging from 4-H youth development to caring for your lawn and garden on that Web site, or you can contact an agent in your parish’s LSU AgCenter Extension office for more details.

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Contact: Matt Fannin at (225) 578-0346 or mfannin@agcenter.lsu.edu
Editor: Tom Merrill at (225) 578-2263 or tmerrill@agcenter.lsu.edu

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