Will high food costs cost restaurants business?
Grocery prices have been increasing steadily in the U.S. for a number of months, but at restaurants food is getting more expensive at an even faster rate than on grocery shelves.
While “food at home” prices are up 2.5 percent in October, according to a USDA study, “food away from home” prices are up 3.6 percent, PYMNTS reports. The disparity is expected to grow even more — grocery prices are predicted to increase an additional 1.5 percent to 2.5 percent next year, while restaurant prices rise between three percent and four percent. The higher rate of price increase has led to speculation that customers will soon be choosing grocery stores as the economical option over going out to eat.
The give and take of market share between restaurants and grocers has been a recurring theme since the beginning of the pandemic.
In March of 2020, the introduction of rigid social distancing guidelines throughout the U.S. forced many restaurants to close on-premises dining entirely. Some were able to sustain themselves through outdoor dining and pickup/delivery options. Some turned to selling commodities normally used as ingredients for delivery or pickup, to meet the needs of customers having difficulties finding products in the grocery store due to disruptions in the food supply chain.
By early 2021, more than 110,000 eating and drinking establishments were reported to have closed, either temporarily or permanently, in the U.S., according to Fortune.
Some sources are pointing to a restaurant rebound of sorts with fewer business closures. In New York City, only 21 restaurants closed permanently in Q3 of 2021 compared to the 82 that closed in Q3 of 2020, according to the New York Post. Restaurateurs are also picking up new leases throughout the city.
At the time when restaurants were unable to do business early in the pandemic, grocers experienced an unprecedented influx of shoppers. Not only did customers have limited options for getting food elsewhere, but the panic buying and hoarding of staples grew rampant. Grocers also experienced an unprecedented demand for pickup and delivery services.
- As Restaurant Prices Rise, Consumers May Give Grocery Stores a Second Look – PYMNTS
- Grocery prices are rising: Expect these 5 foods to cost more this summer – Today
- Will selling groceries help restaurants ride out COVID-19? – RetailWire
- More than 110,000 eating and drinking establishments closed in 2020 – Fortune
- Chew on this: NYC’s bars and restaurants are making a comeback – New York Post
DISCUSSION QUESTIONS: How important are price considerations for consumers choosing whether to dine at home or at a restaurant? Do you see a further shift toward grocery and away from restaurants taking place over the next year?