Restaurants vs. Grocery Stores

by | Mar 5, 2024 | blog, Business, Industry News, National Restaurant Consultants, Trends | 0 comments

We have been tracking grocery prices since last year, comparing them to increases on menus across the United States. The gap between grocery stores and restaurants has widened in the wake of the COVID-19 pandemic, forcing diners into their homes—and new eating routines. As restaurants re-opened, some customers were slow to return, having developed new rhythms and skills in their personal kitchens. 

Rising food costs are disrupting these patterns again, however. Last summer, we reported on an inflation-related increase of 13% in grocery stores, and for awhile, despite these skyrocketing costs, restaurants were able to sustain prices to keep the dining out experience affordable. However, it didn’t take long for rising prices to make their way on to restaurant menus. We shared, “The price gap between restaurants and retail groceries remained at 5.5 percentage points in August, tying the July chasm, which was the largest in favor of restaurants in 40 years,” and restaurants were forced to pass those changes along to guests. 

So who is winning the “share of the stomach competition” now, Nation’s Restaurant News (NRN) asks? “While menu prices cooled to 5.2% in December — their lowest level since September 2021 — they remain much higher than overall inflation, at 3.9%. Importantly, they also remain much higher than grocery/supermarket prices, which decreased for the 16th consecutive month in December, to 1.3%. The question now is how much is that nearly 4% gap between restaurant and grocery impacting an intense share of stomach competition?”

As NRN explains, customers are becoming increasingly—understandably—inflation weary. And while everyone is tired of feeling affected by the pandemic, the restaurant industry is still suffering consequences: primarily, shutdown related debt. This dual pressure is, of course, pushing up menu prices as restaurants try to appeal to tired guests while keeping their doors open and their employees cared for. 

Even in this tension, from a sales perspective, restaurants are starting to pull ahead of grocery store numbers. “According to Kalinowski Equity Research, restaurantsmarket share was nearly 56% in December, which is about 10 basis points below the all-time monthly record. Comparatively, restaurantsmarket share in 2022 was 53%,” NRN reports. 

What does this mean for restaurant owner-operators? Richard Weil, owner and principal of National Restaurant Consultants believes, “Consumers are still pro dining out. They want the experience that restaurants bring to their lives. Dining out remains a positive part of consumers’ daily and weekly lives. Operators must continue to create their own points of differentiation by providing great service, great food, and above all, meet and exceed the guests’ expectations.”

There is hope for restaurants to continue to strengthen their market share and improve in the  COVID-recovery process. According to NRN’s blog post, Kalinowski “expects restaurants to continue gaining market share in the next 12 months, though those gains could be muted by the pricing gap between the two categories.”

If your business is struggling to navigate this tumultuous landscape of post-pandemic regulation and consequences, coupled with economic turmoil, you are not alone. Our restaurant consultants are working with clients trapped in the same pattern and reorganizing menus and operations to make their businesses as successful as possible while prioritizing customer service. Our experience and tight watch on the current unpredictable economic trends help us guide our clients into profitability, even in these trying financial times. 

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