As Foodservice IP caveats each year, 2024 brings both challenges and opportunities. The angle we’ll take on this edition is the impact of consumer spending on the industry – after all 75% of GDP is consumer spending and DPI is the lifeblood of foodservice.
Despite continued media attention on stale consumer spending, the industry showcased remarkable resilience last month. Restaurant sales rose 11% year over year in December, according to federal data. Most of that was driven by higher prices—menu prices at restaurants and bars were up 8.5% over that same period.
This blog aims to explore five considerations for food manufacturers to approach consumer spending with cautious optimism.
1.Revolutionary Approaches at Entertainment Centers:
Family entertainment venues, such as bowling alleys and golf simulators, are spearheading inventive strategies to rekindle consumer interest. Faced with a decline in midweek outings, establishments like Dave & Buster’s are reinstating popular promotions, like the all-you-can-eat wings offer on Mondays and Thursdays. Topgolf is also exploring additional midweek discounts, while Bowlero introduces unlimited late-night bowling and half-priced arcade games on Wednesdays. These pioneering approaches aim to rejuvenate the midweek outing experience.
2.Resilient Retail Sales Amidst Inflation:
Despite concerns over consumer spending, retail sales demonstrated resilience by rising 5.6% in December compared to the previous year. This figure closely mirrored the 5.8% increase in December 2022, showcasing the industry’s ability to withstand economic pressures. Notably, retail sales outpaced inflation, which saw a notable slowdown at 3.4% in December. This resilience signals a positive outlook for the foodservice industry.
3.Navigating the Midweek Business Boom:
The midweek outing, fueled by increased free time and flexible schedules in the remote-work era, has become a thriving business for entertainment chains and restaurants. However, signs of a midweek slowdown could pose a threat to this trend. Consumers, facing stress, may curtail midweek spending to protect their weekend splurges. This shift could impact the robust growth experienced in the “eatertainment” space over the past three years.
4.Consumer Spending Trends Across Income Brackets:
A detailed examination of consumer spending plans unveils intriguing insights. In the third quarter, lower-income brackets witnessed a decline in restaurant visits. Those earning less than $25,000 reported a decrease from 53% to 50% in using restaurants once a week or more, indicating the impact of higher prices. A similar trend was observed in the $25,000 to $50,000 income bracket. In contrast, higher earners (those making more than $150,000 a year) exhibited stability, with 84% reporting using restaurants once a week or more, showcasing resilience to economic fluctuations.
5.Adapting Strategies for Evolving Consumer Behavior:
Understanding consumer behavior is paramount for the foodservice industry. While consumers may indicate preferred behaviors, their actions may not always align. Therefore, monitoring operator sales increases or price changes becomes crucial in gauging foodservice growth or declines. Adapting strategies based on evolving consumer preferences and economic dynamics is vital for staying ahead in this competitive landscape.
Strategic Flexibility is Always Recommended
As the foodservice industry charts its course through the complexities of consumer spending in 2024, a strategic and adaptable approach is paramount. By staying agile and attuned to these five key factors, foodservice stakeholders can not only weather challenges but also uncover new avenues for growth and success.
Foodservice IP is a professional services firm aimed at delivering ideas for managers to guide informed business decisions. To learn more about FSIP’s Management Consulting Practice, click here.
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