Inflation gives Americans another reason to cook at home
Domino’s Pizza last week said its research shows, to avoid delivery costs, more customers prepare meals during inflationary times rather than order pizza.
Russell Weiner, CEO, said on the pizza franchisee’s fourth-quarter analyst call, “We believe this dynamic will continue to pressure the delivery category in the short term as long as consumers’ disposable income remains pressured by macroeconomic factors.”
Domino’s findings lend credence to sentiments from grocers and ingredient makers such as McCormick that the at-home cooking binge during the pandemic lockdowns, the rise of hybrid working, and now inflationary pressures continue to elevate at-home cooking.
Kroger’s “2023 Food Trends Report” centered on America’s eat-at-home habits continuing even as pandemic concerns subside.
“Customers not only learned to cook during the pandemic, they grew to love it,” said Stuart Aitken, Kroger’s SVP, chief merchant and marketing officer, in a press release. “In 2023, cooking at home remains a mainstay with customers gathering together to celebrate time lost and save money as inflation moderates.”
On a quarterly call in December, Rodney McMullen, Kroger’s CEO, said inflation is leading customers to download coupons and purchase more store brands but is not impacting overall grocery spend. “It’s still three times or four times cheaper to eat at home versus going out to a restaurant and so many more people have learned how to cook,” he said.
IRI’s point-of-sale data showed that at-home food spending remained strong in the fourth quarter, with center store sales up 11.1 percent and perimeter sales up 6.3 percent. Private label sales and promotions increased, while premium purchases declined.
“The CPG space has proven to be less volatile and more resilient during economic downturns than other sectors,” said Alastair Steel, executive, client engagement, IRI. “However, shoppers are feeling the impact of high prices and are shying away from discretionary purchases.”
Inflation still hasn’t slowed the recovery in restaurant spending as consumers continue to seek experiences after being cooped up during COVID. Mastercard SpendingPulse found restaurant spending jumped 24.2 percent year-over-year in January after a 15.1 percent gain in December.
Food-away-from-home inflation in the U.S. remains slightly lower, up 8.2 percent year-over-year in January, compared to 11.3 percent food-at-home inflation.
- Domino’s Pizza Inc (DPZ) Q4 2022 Earnings Call Transcript – AlphaStreet
- Kroger Announces Food Trend Predictions for 2023 – Kroger
- Kroger (KR) Q3 2022 Earnings Call Transcript – The Motley Fool
- McCormick (MKC) Q4 2022 Earnings Call Transcript – The Motley Fool
- New IRI Report Reveals At-Home Food Spend Remains Strong, Despite 13 percent Increase in Inflation – IRI/Business Wire
- Dining out vs. cooking in as inflation rises – The News Feed
- Mastercard SpendingPulse: U.S. retail sales up +8.8% year-over-year in January – Mastercard
- Inflation didn’t slow restaurant spending in January – Nation’s Restaurant News
- Food Price Outlook, 2023 – USDA
- How can grocers reawaken the home cooking bug? – RetailWire
DISCUSSION QUESTIONS: Will high inflation, including grocery, contribute more to increasing or decreasing the appeal of home cooking? What are the most critical drivers of at-home cooking’s growth?
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12 Comments on "Inflation gives Americans another reason to cook at home"
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Managing Director, GlobalData
Food inflation – which remains hefty – is certainly driving changes in food habits. Cooking at home is a great way to reduce costs, especially for families, and this is one of the reasons that it continues to be a popular activity. However it’s not just about inflation: the fact that increased numbers of people work from home either permanently or more often means there is more time and scope to prepare meals. The other thing to note is that Domino’s findings don’t apply to all restaurants segments. McDonald’s sales have increased because some consumers are buying its great value meals more often because it can be cheaper than buying meals from a supermarket.
Professor, International Business, Guizhou University of Finance & Economics and University of Sanya, China.
Neil, you make a perfect point regarding more people working at home. Pre-pandemic, my wife and I would eat out often. Now, as she is retired, most meals are made at home. Dining out is no longer a necessity (“I am just too tired to cook.”), it is a treat.
Industry Consulting, Retail, CPG and Hospitality
I’ve commented on inflation many times and there is no doubt it is having an impact on average consumers’ wallets and decision-making for all kinds of meals, whether that’s in-home cooked or away-from-home restaurants. The underlying macro-economic indicators lend themselves to a higher propensity of customers to stay at home and cook for friends/family. Grocers and CPGs ought to creatively bundle fresh, high-quality, convenient meals that can deliver a wonderful experience at an affordable price.
Chief Operating Officer, Bloo Kanoo
The appeal and the necessity of home cooking are two distinct forces neither of which can be properly analyzed with short term, inflation- and pandemic-laden data. I believe we will revert to our customary ways as things normalize and though some will continue their new found passion for cooking, many will return to the escape and convenience that dining out provides (especially if people continue working from home).
Chief Amazement Officer, Shepard Presentations, LLC
A change in conditions, such as the economy, a pandemic, etc., can spur new habits. That’s what’s happening now. If the economy trends in the other direction, we will see more people spending freely. For now, the impact of the economy has more people choosing to stay home for dinner rather than go out. For at-home cooking to continue to be strong and grow, retailers just can’t accept the good times. They must embrace these times and find creative ways to keep customers continuing the at-home experience.
Founding Partner, Merchandising Metrics
The pandemic + WFH + inflation is a powerful combination in driving home cooking. But pizza from scratch is not among my culinary skills. So it’s either delivery or grabbing my car keys. Or — DiGiorno! The frozen food aisle now offers some pretty great alternatives to pizza delivery. Now if I could just find a great frozen version of kung pao chicken.
Independent Board Member, Investor and Startup Advisor
Over the past year, food-at-home inflation rose higher than food away from home, according to USDA Economic Research Service. For 2023, they predict food-at-home prices to increase by 8.6 percent, with food-away-from-home prices to increase by 8.3 percent. Those numbers suggest that restaurants have an edge, while grocers and CPG companies must create more compelling meal solutions and rethink how much inflation cost they will pass on to consumers.
Professor, International Business, Guizhou University of Finance & Economics and University of Sanya, China.
The U.S. is far from the epicenter of in-home dining. Only Spain, with the tapas culture, exceeds the U.S. in the frequency of eating out.
Professor, International Business, Guizhou University of Finance & Economics and University of Sanya, China.
In the long run, out-of-home dining will not be a cost decision. As inflation ebbs, consumers will return to their old habits. In the late-’70s, when inflation was twice as high as it is today, out-of-home dining boomed post-inflation.
President, b2b Solutions, LLC
Food inflation has encouraged/required consumers to consider cooking at home as a daily or at least a more frequent alternative. Once they did, they found it not only reduced cost, but was something they enjoyed. I don’t expect the this to change or fade away should food inflation lessen.
CFO, Weisner Steel
The Domino’s comment surprised me, tho perhaps not in the way one might think: there are many ways to lower costs, and one is trading down; Domino’s being — let’s be candid here — a low-cost provider I would think would benefit from this (maybe Mr. Weiner will need another explanation if sales continue slow?).
As far as the comparative metrics: continued high inflation, combined, of course, with the near total shutdown of restaurants during the pandemic, make talk of “Recovery” suspect.
President and CEO, Vector Textiles
Increasing. Key drivers are cost, followed by cost, with cost coming in next. Hopefully the joys of home cooking (families at a dinner table, etc) reinforce this beyond the financial savings.