Inflation has ballooned grocery prices so much over the past several months that some Americans have changed the way they think about grocery shopping. Dining out has, in some cases, become the cheaper alternative to cooking at home, and those who opt for the latter might adopt a “buy now, pay later” approach. In 2023, inflation is still doing its thing, but one market metric has returned to the norm. The U.S. Bureau of Labor Statistics has released the Consumer Price Index for April, and the gap between grocery prices and restaurant prices has widened, with prices favoring home cooking once again.
Although the difference is minimal, if current market trends continue we could be back to the times when dining out was a real treat and cooking at home was the everyday way to save. The index for food at home was down 0.2% in April, while food away from home went up 0.4%.
All forms of non-grocery food saw an increase in price. The increase on Takeout food was, at least, the smallest it’s been since December of 2022, and in March the increase was 0.6%. Full-service menu prices went up 0.1% in April, and limited-service (aka fast casual) menu prices were up 0.6%. Overall, pricing on food away from home is up 8.6% over last year.
On the other hand, grocery prices have been slowly but surely coming down. The cost is still up 7.1% from last year, but came down 0.3% in March and 0.2% in April. Plus, four of the six major grocery store categories decreased in price across the month. Fruits and vegetables, meats, poultry, fish, and eggs all declined over the month of April. Dairy products also decreased, and milk specifically saw a major decrease at 2%. The BLS noted that this is the largest decline for milk since February 2015.
Once again, though the numbers may appear small, the impact is large. Take, for example, the strategy many restaurants are taking to combat inflation: Nation’s Restaurant News reports that many restaurants are shifting away from special discounts in order to focus on “everyday value.” This is also a way of trying not to scare customers away with the steady menu price increases that have been necessary due to inflation.
This change is evident based on the various food deals that were offered for Mother’s Day celebrations this year. From a consumer perspective, past years have offered more freebies and discounts, whereas most of the deals this year could only be redeemed with the purchase of a gift card, or by signing up for a rewards program.
“Several restaurants are reducing the amount of promotional activity and risking a reduction in traffic, because that traffic isn’t necessarily profitable for them,” said Sara Senatore, a senior research analyst with Bank of America, to Nation’s Restaurant News.
Leadership from both Bloomin Brands, which owns Outback Steakhouse, and Brinker International, which owns Chili’s, have clearly stated in recent earnings calls that despite some dips in restaurant traffic the company’s focus will be on everyday menu value. For Outback Steakhouse, the value emphasis is on its limited-time offer, a $16.99 steak with lobster mac and cheese, which does not require a coupon. Similarly, Yum Brands, which owns KFC, recently brought back the Double Down sandwich and introduced two for $5 wraps.
Dining out five days a week because it was actually cheaper than buying groceries was a fun time, but that era seems to be coming to an end. If inflation in the grocery category continues to trend the way it has been, dining habits might just go back to what we were all accustomed to pre-pandemic (and certainly mid-pandemic). For the budget-conscious, date nights and other special occasions might be the only reason to order out, and cooking meals at home might be the norm again.