Tuesday, December 19, 2023

Meals Now Cost Less Maybe


What’s for Dinner? If how much you pay for dinner is a consideration, then there you shop for food matters.  It is at the intersection of how much dinner cost and convenience that consumers make the choice on where to get dinner according to Steven Johnson Grocerant Guru® at Tacoma, WA based Foodservice Solutions®.

That said, There was an old formula for the price, value, service success was: Price + Quality + Service + Portability = Value, and it was at that intersection the consumers spent more money freely.

That formula has evolved with Gen Z and Millennials today.  Foodservice Solutions® Grocerant Guru® has once again retooled, reevaluated, calculated then evolved the formula and here is the new formula:  Price + Quality-Flavors + Social + Fresh Prepared +Portability = Value. Here is some good news; November marked the eighth consecutive month of decelerating menu prices. Watch for consumers to spend more this month at restaurants.  Life is just that simple.

The Consumer Price Index for November showed a 3.1% increase year-over-year, down a tick from the 3.2% pace in October, according to a Bureau of Labor Statistics report released last week.

Here this is important, food prices, both at home and at restaurants, decelerated on the month. Food-at-home prices, including grocery stores and supermarkets, rose by 1.7% month-over-month (versus 2.1% in October) and 2.9% year-over-year and continued to trend down at a faster rate than restaurants. The pace of inflation for the grocery/supermarket category has now fallen below the Federal Reserve’s 2% target rate. Note: that is a one month number and consumers know that they are paying about 18% - 20% more than they were in 2019.  That is where the mind-set problem lies with the consumer so be careful in how you message menu price information to them and with them.

Now then, menu prices, meanwhile, were up 5.3% year-over-year – versus 5.4% in October – and rose 0.4% in November, consistent with its month-over-month increases in October and September. Full-service meals rose 0.5%, while the index for limited-service meals increased 0.4% over the month. On the year, limited-service meals increased 6%, while the index for full-service meals rose 4.3% year-over-year. November marked the eighth consecutive month of decelerating menu prices.

Despite the widening gap between the grocery/supermarket category and restaurants, and some erosion in restaurant traffic, Mark Kalinowski, president and CEO of Kalinowski Equity Research, is confident that restaurants will continue to take share from grocery. This year, for instance, restaurants gained 150 basis points of market share from the grocery sector, and he expects another 50-to-100 basis points next year, barring a recession.

“Consumers may complain a lot about higher prices, but their actions speak louder than words,” he said during a recent interview. “Americans have shown they want restaurants to be a big part of their lives.”  

That said, he notes the consumer is becoming more guarded and expects “meaningfully less pricing” taken in 2024. So, if you want to get a bump in sales, put something on sale this year.

Matthew Shay, president and CEO of the National Retail Federation (NRF), also noted last week that consumers are balancing caution and optimism. “November Retail Monitor data shows that consumers are embracing the holiday season and promotions being offered by retailers,” he remarked. “Value conscious shoppers are out looking for deals as they purchase gifts for family and friends, and this data indicates that they’re finding them. Since November makes up half the holiday season, these numbers are a positive indication of what we can expect for the full holiday season.” 

Are you trapped doing what you have always done and doing the same way?  Interested in learning how Foodservice Solutions Five P’s of Food Marketing can edify your retail food brand while creating a platform for consumer convenient meal participationdifferentiation and individualization?  Email us at: Steve@FoodserviceSolutions.us

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