The Wall Street Journal has a piece entitled “Restaurants and Supermarkets Are Brawling Over Your Dollar” that details the growing – but utterly predictable – battle for shoppers’ food dollars.
Here’s how the Journal frames the story:
“Supermarkets and restaurants are ramping up their tug of war for Americans’ stretched food budgets.
“Grocery chains are revamping prepared meals in delis and buffets, expanding menus and offering more discounts, seeing a chance to woo diners away from restaurants. Retail executives say that U.S. consumers have gotten more discerning about eating out, an opportunity for grocers to offer potentially cheaper, faster alternatives.”
Meanwhile, “Restaurants are fighting back, designing new menu items that they say would be tough to replicate at home. Executives at Chipotle Mexican Grill, Domino’s Pizza and Taco Bell-parent Yum Brands YUM dismiss the idea that cash-strapped consumers will give up professionally prepared meals for food made at a grocery store or in their own kitchens.”
The Journal goes on:
“Inflation has upended the typical economic dynamic between eating at home versus going out. Grocery prices increased at a faster rate than restaurants in 2022——a phenomenon that hadn’t occurred in decades——until it flipped in March. The price gap has since widened, with grocery prices rising 3.6% while restaurant prices increased by 7.1% in July compared with the same month a year earlier, according to the Labor Department. Overall food prices have moderated in recent months as inflation has eased.
“U.S. consumers’ budgets remain under pressure. The federal government reduced food-stamp benefits in March that it had increased earlier in the pandemic. People have been buying cheaper items and fewer products at supermarkets, executives have said, and they are eating out at restaurants less often, or ordering less when they do visit.
“In supermarkets, sales of prepared meals grew 8.3% in dollar terms and remained relatively steady in terms of units sold over the past year, according to research firm Circana Group. Overall food and beverage unit sales declined by 3% over the same period.”
KC’s View:
I say “entirely predictable” because coming out of the pandemic, after supermarkets were able to grab market share from restaurants hobbled by Covid-related realities, it is inevitable that a battle for food dollars would emerge. Inflation only increased the stakes and heightened the battle.
It was an article of faith here during the pandemic as food retailers feasted at the table of shifting customer needs – they needed to continue to press their case for why supermarkets were a better value than restaurants, and not allow restaurants of any kind to win that argument.
It’s not too late to do so, but it requires playing hardball.
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