In a notable shift in consumer behavior, Americans are increasingly choosing to dine at home rather than eat out, a trend that has significant implications for the food industry. This change, driven by inflationary pressures, is reshaping the landscape for restaurants, fast-food chains, and grocery retailers.
Christopher J. Kempczinski, CEO of McDonald's, acknowledged this trend, stating:
"You are seeing consumers being much more discretionary as they treat restaurants. You're seeing that the consumer is eating at home more often. You're seeing more deal seeking from the consumer."
This shift is evident in the recent performance of major restaurant chains. McDonald's, which serves approximately 69 million customers daily in over 100 countries, reported a 1.1% drop in comparable sales during its second quarter of 2024, a stark contrast to the 11.7% increase observed in the same period of 2023. Similarly, Darden Restaurants, the parent company of Olive Garden, experienced a 1.1% decline in sales at restaurants open for at least a year, with Olive Garden itself seeing a more pronounced 2.9% decrease.
To counter this trend, restaurant chains are implementing strategies to attract budget-conscious consumers. Olive Garden, founded in 1982 in Orlando, Florida, has reintroduced its popular "never ending pasta bowl" promotion, which was first introduced in 1995. McDonald's, whose history dates back to 1940 when the first restaurant was opened by brothers Richard and Maurice McDonald, has launched a $5 value meal deal, reminiscent of the $5 footlong promotion popularized by Subway in 2008.
While restaurants struggle, food producers and grocery stores are benefiting from the shift towards home cooking. General Mills, a company founded in 1866 that produces popular brands like Cheerios (introduced in 1941 as "Cheerioats"), Progresso soups, and Häagen-Dazs ice cream (created in 1960 in the Bronx, New York), is seeing increased sales volumes. Jeffrey L. Harmening, CEO of General Mills, noted that consumers are prioritizing value in their food choices.
Grocery stores are also reaping the benefits of this trend. Kroger, the largest supermarket chain by revenue in the United States, reported a 1.2% increase in sales at stores open for at least a year during its most recent quarter. Rodney McMullen, Kroger's CEO, expressed cautious optimism about the company's sales outlook, expecting customers to continue prioritizing food and essentials.
This shift in consumer behavior is part of a broader trend in the food industry. The global fast food market, valued at $647.7 billion in 2019, is facing challenges as consumers become more price-sensitive. Conversely, the global grocery market, which was valued at $11.7 trillion in 2019, is seeing growth as more people opt for home-cooked meals.
The current economic climate has led to a reversal of previous trends. In recent years, grocery inflation had outpaced restaurant prices as food producers raised prices, often increasing their profit margins. However, since mid-2023, grocery prices have been cooling faster than restaurant prices, making home cooking a more attractive option for budget-conscious consumers.
As the average American spends about 10% of their disposable income on food and eats out 5.9 times per week, this shift towards home cooking represents a significant change in dining habits. The food industry, from fast-food giants to grocery chains, will need to adapt to these evolving consumer preferences to thrive in the changing economic landscape.