Have restaurant meals become a better deal than food from grocery stores?
The conventional wisdom has long been that you are financially better off making food at home than splurging on eating out. But the inflationary economy might be flipping that logic on its head.
Prices in grocery were up 13.1 percent in July 2022 year-over-year, but restaurant prices were only up 7.6 percent, according to a Wall Street Journal report. This disparity represents the largest gap of its type since the 1970s and some major quick-serve restaurant chains have already expressed plans to play up the value of their product.
Ads from top restaurant chains focusing on deals have been on the upswing this year with 46 percent highlighting deals from January through April and 58 percent between May and August.
Grocery inflation pulling ahead of restaurants is consistent with trends seen in late 2021 and early 2022. The Department of Labor announced that grocery prices increased 6.5 percent in December of 2021 with restaurant prices only increasing six percent during the month, according to CNBC.
The economy tilting in restaurants’ favor represents a big change from the early days of the pandemic. Restaurant closures and social distancing regulations pushed U.S. consumers to eat primarily at home, spending on groceries over restaurants at a rate not seen since 2008.
The inflation that restaurants have experienced, while low in comparison to grocers, has not been insignificant. Local news reports tell stories of restaurants being forced to pass on costs to customers due to increased ingredient prices.
While inflation cooled for gas prices in July, food costs continued to climb, according to a CNBC report from early August. The cost of baked goods was up 15 percent year-over-year, milk and dairy were up 14.9 percent and fruits and vegetables were up 9.3 percent. Prices are still expected to climb 6.7 percent over the next 12 months. Experts say it will take time for the Fed rate hike to cycle through the economy.
- Restaurant Meals Become a Relative Bargain as Grocery Prices Soar – The Wall Street Journal
- Restaurants Closing Food Price Gap – Food Processing
- Rapidly rising food prices may give restaurants an edge — here’s why – CNBC
- Restaurants struggling with pandemic, now struggle with inflation – CBS 6 Albany
- Gas is cheaper but groceries are not: How to save as food inflation jumps at the fastest pace since 1979 – CNBC
DISCUSSION QUESTIONS: Will U.S. consumers shift more food dollars to restaurants through the balance of 2022? How do you see restaurant and grocery marketing responding to rising food prices over the next six months?