Food & Beverage Perspectives
Restaurant Sales Trump Grocery Store Sales

1st Time Ever: Restaurant Sales Trump Grocery Store Sales

Food and beverage manufacturers and marketers are always playing a game of cat and mouse to succeed in the grocery retail sector. From new product development to savvy marketing, companies spend millions of dollars to get their products in consumers’ homes. But new statistics released a few days ago by the National Restaurant Association that found monthly sales at restaurants exceeded grocery store sales for the first time on record should serve as a wake-up call to the industry.

Food and beverage manufacturers and marketers are always playing a game of cat and mouse to succeed in the grocery retail sector. From new product development to savvy marketing, companies spend millions of dollars to get their products in consumers’ homes. But new statistics released a few days ago by the National Restaurant Association that found monthly sales at restaurants exceeded grocery store sales for the first time on record should serve as a wake-up call to the industry.

According to the National Restaurant Association's Chief Economist Bruce Grindy, the data was confirmed by the U.S. Census Bureau’s annual benchmark of data. The gap between monthly grocery store sales and restaurant sales started gradually shrinking in 2010—a trend that was partially due to the increase in consumers buying their groceries at big box stores.

Grindy noted there has been a dramatic shift toward restaurants that occurred in the last 10 months. In June 2014, grocery store sales exceeded restaurant sales by $1.6 billion; by April 2015, the gap had essentially reversed, with restaurant sales moving out in front by $1.5 billion. The $3.1 billion sales shift registered during the last 10 months is nearly as much as occurred during the previous 4.5 years.

So what is going on in the marketplace to cause this shift? The answer is a number of variables that have combined to create a perfect storm—or headache—for food and beverage CPG companies.

First, household finances are getting a boost from lower gas prices. Results of an association phone survey found 80 percent of car owners said the recent decline in gas prices positively impacted their household finances. This sentiment was generally consistent across all income levels, with individuals in lower-income households the most likely to say that lower gas prices had a “very significant" positive impact on their finances.

Second, restaurants are likely benefitting from lower gas prices. Among car owners who said the recent decline in gas prices positively impacted their household finances, 49 percent said the lower gas prices have increased their willingness and ability to do things like purchase meals, snacks or beverages from restaurants, QSRs or coffee shops.

Third, growing consumer confidence is boosting restaurant frequency. Overall, 33 percent of adults surveyed said they are patronizing restaurants more often now than they were one year ago. Reasons include more confidence in their financial situation, lower gas prices or a boost income or investments.

It will be interesting to see if these spending patterns will hold when gas prices increase again. But one thing is for sure, there appears to be even more room for growth in the months ahead. According to Grindy, putting these results in a historical context, this measure of pent-up demand remains well above pre-recession levels.

It will be interesting to see how food and beverage manufacturers and marketers respond to this new data.

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