Restaurant prices rise faster than grocery store prices in March
People sit outside at the Little Shrimp restaurant on June 05, 2021 in the Brooklyn borough of New York.
Robert Nickelberg | Getty Images
For the first time since inflation began accelerating in mid-2021, restaurant prices exceeded grocery store prices year-over-year, according to the Department of Labor.
It’s a blow to the restaurant industry, which has already seen lagging traffic numbers as budget-conscious consumers cut spending. For months, restaurant CEOs love cheesecake factory Matthew Clark and Wendy’s Todd Penegor touted his meals as a relative bargain compared to eating at home, based on Consumer Price Index data.
Food prices in March rose 8.5% over the past 12 months, fueled by the rising cost of meals away from home, which rose 8.8% over that period. For the third consecutive report, the price of food served outside the home rose 0.6% month over month.
National Restaurant Association Chief Economist Bruce Grindy assigned the increase in soaring food prices in schools as free lunch programs were instituted during the covid pandemic expired.
“As a result, this price index has risen sharply in recent months, putting upward pressure on the overall out-of-home food index,” he wrote in a blog post on Wednesday, adding that it should continue to distort the global diet. -remoteness index until the fourth quarter.
The price of take-home food has risen 8.4% over the past 12 months and is actually down 0.3% from February. Egg prices fell 10.9% in March from the previous month, while the fruit and vegetable index fell 1.3%.
For months, grocers have been lobby on food and drink makers to keep prices low as shoppers face sticker shock, ditch private labels and put fewer items in their shopping carts. Some providers have listened to their volume decrease: Conagra Brands And PepsiCo said they won’t raise prices again this year, while the owner of Old Bay Seasoning McCormick said it was trying to raise prices, but was facing pushback from retailers.
All consumer price index has risen 5% over the past 12 months as inflation continues to subside. This was below expectations of a 5.1% increase. Similarly, many restaurant businesses have also reported that inflation is moderating, although food, labor and construction costs remain high.
The parent company of Olive Garden, Dard Restaurants, for example, said in March that chicken, dairy and grain prices remained high in its third fiscal quarter, although they improved sequentially. Darden forecasts low-single-digit inflation for its ingredients in fiscal 2024. The catering company has kept its menu price increases below the rate of inflation to attract diners and gain market share.
But most restaurants chose to raise prices instead to avoid squeezing their profit margins. As a result, consumers have reduced their restaurant visits or spent less money when dining out.
Restaurant industry tracker Black Box Intelligence reported that the industry saw traffic growth in just two months – January and February – last year. These two months surpassed last year’s omicron covid outbreaks, which led to a sharp drop in restaurant sales and traffic in early 2022.