Commercial Equipment, NEC

SIC 5046

Companies in this industry

Industry report:

This industry classification is composed of establishments primarily engaged in the wholesale distribution of commercial machines and equipment, not elsewhere classified. Products of the industry include commercial cooking and food service equipment, partitions, shelving, lockers, store fixtures, electrical signs, balances and scales (except laboratory), mannequins, and vending machines.

The two largest wholesalers in this industry are restaurant and hotel equipment and supplies and store machines and equipment. According to the U.S. Census Bureau, the 4,184 establishments in the miscellaneous commercial equipment industry employed approximately 47,005 workers in 2009, with an annual payroll totaling more than $2.2 billion. The majority of firms were typically quite small. For example, in 2009, 76 percent of establishments in this industry had fewer than 20 employees. Total revenues for the industry reached $19.7 billion that year, with the restaurant and hotel equipment and supplies sector accounting for 68 percent of sales. Store machines and equipment accounted for 22 percent, and the smaller categories as defined by the U.S. Census Bureau of service receipts and labor charges, refrigeration equipment and supplies, and paper and plastic products made up the remainder.

Based in Chicago, the North American Association of Food Equipment Manufacturers (NAFEM) promotes the industry through conferences, workshops, and trade shows while assisting in the development of its members by conducting surveys, focus groups, and telephone audits. NAFEM also publishes a quarterly magazine, NAFEM in Print, and quarterly newsletter, "NAFEM for Operators," to disseminate news and information to members along with tracking sales within the industry. These publications highlight topics important to the industry, such as product innovations and energy-efficient equipment. The industry also has been challenged by business activity taxes, and NAFEM continued to work with the government to create legislation called the Business Activity Tax Simplification Act (BATSA) to reverse the negative impact of taxes.

In the late 1990s, domestic restaurant chains and their suppliers began a continuing trend of increased presence in overseas markets. Unit openings of restaurant chains in Europe and elsewhere were about double the openings in the United States. Since these restaurants maintained a preference for U.S. equipment, this expansion offered opportunities for both manufacturers and distributors. Distributors supporting overseas markets needed the ability to handle post-sales service requirements, local order fulfillment, and language barriers.

Sales of store fixtures increased dramatically during the 1970s and the 1980s but stalled during the first years of the 1990s. The initial growth was attributed to the number of shopping malls under construction during the period as the number of shopping malls in the United States increased dramatically from about 3,500 in the mid-1970s to approximately 35,000 in the early 1990s. As a result, the combined value of wood and nonwood store fixture shipments grew from $1.75 billion in 1975 to $6.19 billion in 1990. As the construction of retail outlets generally slowed and overall economic growth lost momentum, demand for industry products leveled off in the years that followed.

During the mid-1990s, suppliers of store fixtures had growth opportunities in three areas: renovations necessitated under the provisions of the Americans with Disabilities Act enacted in 1991; government requirements; and vendor shops, all of which were distinctive spaces within retail establishments devoted to specific products. These three areas, however, did not provide growth as dramatic as had been experienced during the previous two decades. By the late 1990s, wholesalers began to face competition from manufacturers as selling over the Internet was introduced. For instance, St. Louis-based NU-ERA Group developed an online catalog and Newark, New Jersey-based HandyStore Fixtures, Inc., offered thousands of store fixtures for sale on its Web site. As Internet-based shopping proliferated in the first decade of the 2000s, these types of businesses became commonplace, although the impact on the wholesalers appeared to be negligible, with sales figures between 2003 and 2006 remaining relatively stable at $13 billion and $13.5 billion, respectively, according to Dun &Bradstreet.

In 2010 IBISWorld reported that the value of the restaurant and hotel equipment wholesaling industry had reached $21 billion. IBISWorld also noted that a recovery from the recession at the end of the first decade of the 2000s and consumers' willingness to travel and dine out again would aid the industry. Also, according to the report, "More companies will look to invest in technologically advanced and energy-efficient equipment like ovens, deep fryers and heated cabinets. All of these trends will work together to increase revenue and profitability" in the 2010s.

Leading firms in terms of revenue in the early 2010s were primarily restaurant and hotel suppliers, including Silver King Refrigeration Inc. of Minneapolis, Minnesota, with annual sales around $6.6 billion; Richmond, Virginia-based Performance Food Group Co., which recorded sales of $10 million in 2010; and Duni Corp. of Atlanta, Georgia, a subsidiary of Duni of Sweden, a maker of commercial restaurant equipment. Other significant companies within the industry included SYSCO Food Services of Los Angeles, California, with 2010 sales of $912 million; International Dairy Queen Inc. of Minneapolis, Minnesota; and Lozier Corp. of Omaha, Nebraska, which had sales of $321.8 million (including store fixtures and partitions).

Although the number of workers in this industry declined from 53,000 in the early years of the first decade of the 2000s to about 47,000 by the end of the decade, the annual payroll remained steady at around $2 billion. Meanwhile, the broader category of professional and commercial equipment and supplies merchant wholesalers experienced growth, according to the U.S. Department of Labor's Bureau of Labor Statistics. Between 1994 and 2004, the number of employees rose from 589,000 to 643,000, representing an 8 percent increase. By 2010 that figure had dropped to 603,240, in part because of the drop in industry activity during the recession at the end of the first decade of the 2000s.

Examples of industry innovations involved bringing to the market environmentally friendly products, such as refrigeration equipment that was HFC-free, along with reducing the emissions of other commercial food equipment that was certified with an ENERGY STAR rating. Research and development of new technologies included so-called natural refrigerants or hybrids that reduced the use of materials that damage the ozone layer and increased the use of bio-diesel products that converted waste into viable fuel.

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