Restaurant industry sales recovery slows in May
According to the US Census Bureau, food services and drinking places earned $84.98 billion in May, an increase of just 0.7% from April, as consumers tightened their wallets and limited the frequency of drinking. their dining out.
Sales were $84.42 billion in April and $82.39 billion in March. In May 2021, restaurants brought in $72.34 billion.
Chip West, a retail and consumer behavior expert at marketing solutions firm Vericast, attributed the weak sales to consumers reacting to rising menu prices and soaring gas prices. In its view, the food-out-of-home index rose 7.4% year-on-year in May, the largest 12-month increase since the period ending November 1981, according to the Bureau of Labor Statistics. Quick service menu prices increased by 7.3% while full service prices increased by 9%. Additionally, the average cost of gas hit $5 for the first time in recorded history, AAA said.
West predicted that more consumers will begin to choose casual dining and fast food occasions over fine dining, instead of cutting out restaurant dining altogether.
There is research that backs up his claim. Acosta, a global provider of integrated sales and marketing services for the CPG industry, found that 54% of customers are eating out less due to inflation. However, the report also discovered that a third of customers decide to reduce price options.
“Upscale restaurants don’t like to offer coupons, but they need to let their customers know what their value offering is in order to compete and land in the limited consumer consideration set,” West said in a note.
With the economy slowing and a potential recession to come, West believes there will be a decrease in brand loyalty, giving restaurants the opportunity to attract new customers with better offers and promotions. value.
For example, Domino’s, which saw its comps drop 3.6% in the first quarter, reinstated its 50% promotion to drive traffic.
“We haven’t done boost weeks in a few years, and boost weeks are really what bring new customers to Domino’s,” CEO Russell Weiner said on the company’s first quarter earnings call. pizza chain end of April. “And that’s where the magic happens with our loyalty program and all of our digital and analytical capabilities.”
Wingstop also plans to make a value game. Fast Casual’s U.S. same-store sales rose just 1.2% in the first quarter, the weakest year-over-year growth since the pandemic began. The chain believes it was driven by sustained inflation, the renewal of federal stimulus measures and the closure of dining rooms.
CEO Michael Skipworth said Wingstop is better positioned than most to add value as it is a year ahead of soaring inflation. Spot market prices for bone-in wings hit a record high of $3.22 a pound last year, but have since fallen to $1.64 a pound. Earlier this year, the brand launched a set that included 20 boneless wings, four flavors, fries, and two dips for just $15.99. Without TV support, the meal generated transactions and mixed more than 5%.
CEO of Brinker International Wyman Roberts said in February that he believed Chilli’s will benefit from consumers moving away from higher priced concepts. The casual chain recently announced a restructuring Menu “3 for me” to account for inflation, but maintain its value proposition.
“If you just think about the amount of steak consumers ate during COVID, that’s pretty interesting,” Roberts said. “It’s usually a more expensive item, it’s higher check average concepts. … We control what we control, and what we can control, are our value propositions and the quality of our brands. We have one of the strongest value propositions in the industry and casual dining. »