Foodservice Update: Solutions, analytics, and practicality

Despite being several years out of the pandemic, the foodservice sector is still recovering. Current challenges, including rising prices, changing consumer behavior, supply chain issues, and labor shortages, aren’t helping.

The good news is Datassential’s 2025 Industry Forecast projects overall growth of 1 percent in the foodservice industry this year; the bad news is the same—it’s just 1 percent—but at least it’s positive.

“The category has rebounded modestly, especially among operators focused on fresh, high-integrity ingredients,” confirms Jasmine Monteil, director of business development and procurement for CDS Foods Inc. BB #:169939 in Montréal, QC.

Comeback trajectories vary by region, season, and sector. Datassential predicts growth of 1.5 percent in the onsite segment and 1.3 percent in the retail foodservice segment for 2025.

“Traditional institutional foodservice is more constrained,” says Monteil. “The challenge is balancing food cost with labor efficiency while still trying to serve quality meals, something that’s not easy without the right partners.”

Industry analyst Carol Spieckerman, president of Spieckerman Retail in Bentonville, AR, notes, “One bright spot is corporate return-to-office mandates, which are creating new opportunities for catering companies and corporate foodservice.” 

Restaurant Recovery

Within the restaurant segment, Datassential believes fast-casual growth will outpace others this year, with an increase of 1.6 percent, followed by quick-service at 1.0 percent. The report predicts midscale restaurants will decline by 0.5 percent and casual dining is expected to increase by 0.3 percent.

“Fast food and quick-service restaurants continue to perform well,” weighs in Karen White, vice president of marketing for Bakersfield, CA-based Bolthouse Fresh Foods BB #:394665.

“Their ability to consistently deliver value meals at scale has helped them retain consumer traffic, even in a tighter economy. Casual and full-service restaurants are facing more pressure. Consumers are becoming more selective about when and where they dine out.”

“Full-service restaurants are under a lot of pressure with declining foot traffic and rising labor costs pitted against slim profit margins,” weighs in Spieckerman. “Larger chains can better absorb these cost pressures while smaller operators will continue to face an increasingly challenging environment.”

But there are warning signs for fast food. After a strong start to 2025, traffic has been declining according to Revenue Management Solutions.

In April, for example, traffic at quick-service restaurants was down 1.7 percent compared to April 2024. McDonald’s and Wendy’s both reported declining same-store sales in their most recent financial results, issued in May.

“Fast food and quick-service restaurants really felt some headwinds this year with consumers backing away from many of the largest chains.”

“Fast food and quick-service restaurants really felt some headwinds this year with consumers backing away from many of the largest chains,” comments Andy Hamilton, CEO of Markon Cooperative, Inc. BB #:123315 in Salinas, CA. “These chains are heavily influenced by cost-sensitive households and the economic uncertainty was felt strongest there.” 

Meanwhile, some casual and full-service restaurant chains saw better-than-expected earnings due to revenue growth and cost reductions. “Higher-end customers have been much less affected,” Hamilton says.

Robert Schueller, director of public relations for Melissa’s/World Variety Produce, Inc. BB #:111686 in Los Angeles, CA, can attest to such growth. He says overall sales to high-end and white tablecloth restaurants in Southern California and Las Vegas were up 15 percent compared to last year.

He cites new product integration and seasonal fruits, including melons, tree fruit, berries, and grapes, as especially popular.

Consumer Sentiment

A recent KPMG Consumer Pulse study found that 69 percent of consumers are eating at home more, rather than dining out, with 85 percent of those citing budget constraints and higher prices as the reason.

Figures from the International Fresh Produce Association (IFPA) BB #:378962 and research partner Technomic back this up: 59 percent of consumers believe menu prices will rise over the next six months (up from 49% last quarter), notes Ashley Sempowski, IFPA’s manager of communications and public relations.

And it’s likely to occur, since 49 percent of surveyed operators say they plan to increase prices in this timeframe, led by 66 percent of casual dining restaurants.

“This shift aligns with what we’re seeing across the industry,” agrees White. “As more meals shift back to the home, it puts pressure on sit-down dining, which in turn affects fresh produce demand across categories like ours.”

“Food-away-from-home inflation continues to pace significantly higher than food-at-home inflation.”

“Food-away-from-home inflation continues to pace significantly higher than food-at-home inflation,” points out Hamilton.

“This pattern has been persistent for the past few years and affects operators and diners alike. Despite unemployment remaining low, dining out is reflexively an easy event to skip when consumers are nervous.”

Some of the other challenges faced by the restaurant industry include higher fuel prices, which tend to keep people at home; a general lowering of prices to attract consumers, which reduces profits and creates more competition among traditionally separate tiers like quick-service, casual dining, and convenience stores; and labor concerns, which have improved but remain an issue in some areas.

Demand for Value & Convenience

According to Datassential’s Table Stakes report for May, restaurant operators’ top priority was reducing monthly food costs, with 47 percent saying so.

“There’s steady interest in value-oriented products,” observes White, “particularly those that help operators reduce prep time and labor in the kitchen.” She notes Bolthouse Fresh’s baby carrots, jumbo carrots, carrot sticks, matchstix, and individually quick-frozen carrots continue to be reliable staples.

“While overall, produce demand has softened in some sectors, labor-saving ready-to-use formats like these continue to deliver meaningful value and relevance for foodservice operators,” she adds.

Monteil reports upticks in several of CDS Foods’ value-added products. “There’s high interest in peeled garlic, preportioned formats, and combo packs tailored to foodservice needs.” 

Quality remains important along with value and convenience, Monteil says. “Across the board, value-added doesn’t mean cutting corners, it means maximizing efficiency while maintaining the flavor, texture, and quality chefs expect.

“Supply chain unpredictability and rising input costs remain major challenges,” she says. “Our focus is on navigating those pressures without letting quality standards slip.”

“Ethnic, fusion, and flavor-forward segments, particularly Southeast Asian, Middle Eastern, and Latin cuisines, continue to grow.”

One area that continues to expand is demand for global flavors. “Ethnic, fusion, and flavor-forward segments, particularly Southeast Asian, Middle Eastern, and Latin cuisines, continue to grow,” shares Monteil. “These kitchens depend on aromatics and roots that deliver freshness and depth.”

“With more creativity and global menu options across the country, the fruit categories, and particularly tropicals, are seeing higher growth than the traditional items,” adds Hamilton.

A Premium on Customer Relationships

Riding the waves is nothing new and suppliers continue to rely on durable relationships.

“At the end of the day, this industry is built on relationships,” says White. “We place a strong emphasis on direct buyer engagement and the trust we’ve built by consistently delivering great customer service and high-quality products.”

One-on-one conversations, sharing product insights and education, menu inspiration, and product mix guidance are all part of the equation.

“Foodservice industry trade shows and in-person demos remain essential for getting products in front of the right people and creating hands-on experiences that drive interest,” White adds.

“Sampling, one-on-one follow-ups, and direct engagement are how we build trust,” concurs Monteil. “Our team is proactive in understanding all-sized kitchen needs and introducing solutions rooted in quality and practicality.”

Innovation is another key factor. “There are still real opportunities to help operators reimagine how fresh carrots can show up across evolving menu formats,” suggests White.

“Whether through labor-saving formats or kid-friendly flavor innovations, we’re committed to supporting the foodservice channel with practical, forward-thinking solutions.” She cites strong traction for the company’s Carrot Shakers, especially in the school channel.

Cautious Optimism

There is, of course, much to watch moving forward, but one area of particular interest is how technology will transform the landscape.

“Nearly 50 percent of foodservice companies are prioritizing AI and supply chain tracking investments, not just for operational efficiency but for menu optimization and personalization,” mentions Spieckerman.

“The push for technology will also transform supply chain management, where the produce sector’s high pricing volatility is driving a focus on predictive analytics and local sourcing strategies.”

More immediately, economic concerns are top of mind. “If the economy can stabilize without more tariff uncertainty and any other economic shocks,” notes Hamilton, “we should see more growth in all foodservice categories, but those are big ifs.”

“The outlook will be highly dependent on the economy,” he adds. “Recession forecasts have bounced higher and lower all year, which have correlated highly with tariff activity.”

“While there’s uncertainty in the near term, especially with shifting consumer spending and broader economic pressures, we remain confident in the long game.”

Suppliers emphasize the need to continue providing consistent quality, dependable service, and constant innovation.

“We see cautious but meaningful growth ahead, especially among independent operators and multicultural concepts that rely on fresh, authentic ingredients,” predicts Monteil.

In the higher-end dining segment, Schueller mentions multiple trends including more vegetarian and vegan options, tropicals like mangos and pineapples, edible flowers, and microgreens.

White notes, “While there’s uncertainty in the near term, especially with shifting consumer spending and broader economic pressures, we remain confident in the long game.”