Americans are ready to leave their homes and are spending money at restaurants when they are out.
JP Frossard, New York-based analyst with RaboResearch, said that retail spending data from U.S. Census in mid-June confirms that “after 15 months of home-cooking, home-office, home-schooling, home-everything, all the consumer wants is to be away from home.”
Spending with food-away-from-home (foodservice) has continuously expanded, he said. May expenditures for food away from home came 1.8% higher than April, and the past three months combined resulted 21% above the previous three months (December through February). The increases are on the back of restrictions being lifted, vaccination ramping up, and cases dropping.
“Foodservice spending returned to pre-pandemic levels in May,” he said.
Last year, most industry analysts expected pre-pandemic levels could only be reached in 2022.
Frossard said QSR (quick-service restaurants) and limited-service restaurants were the first to start rebounding last year.
“They always counted with cheaper items, drive-through structure (mostly QSR), and a younger audience that was less afraid of the virus,” he said. Full service started rebounding earlier this year, first boosted by the two stimulus packages and now that families are getting together again, he said.
“Suburban restaurants have benefitted much earlier than downtown restaurants; there was some news a few months ago mentioning lunch time is the new rush hour in the suburbs,” he said.
Inflation is playing a role on total spending numbers, Frossard said.
Inflation in food started along with the COVID-19 outbreak back in the second quarter of 2020.
Surging demand for food-at-home and spot disruptions on certain food manufacturing segments in early stages of COVID-19 pushed prices substantially above the general Consumer Price Index throughout the pandemic year
“News headlines now are all about inflation, but mostly attributed to non-food items, such as used cars and trucks (+29.7% year over year), energy (+28.5% year over year), and transportation (+11.2% year over year), i.e., those categories that most dropped early-pandemic.”
The food complex under-indexed (for inflation) at 2.2% year over year, 0.7% for food at home and 4% for food away from home.
The “return to normal life” movement should support higher menu prices in foodservice, Frossard said.
“During COVID, despite dropping demand, restaurants have consistently increased prices as a way to compensate for rising ingredient prices and losses with capacity restriction and other sanitary measures,” he said.
“Now we have a shortage in labor market and consequently higher labor costs. Stimulus checks have also supported the sector (for) food away from home — inflation has remained elevated as food at home has recently dropped, compared with the volatile second quarter of 2020.”
For food retail, Frossard said Rabobank is seeing consumers heading back to brick-and-mortar retail, and online grocery ordering’s share of wallet is dropping for the first time.