Restaurant menu price inflation continues to grow

The historic inflationary environment facing restaurant consumers continued in May, with the out-of-home food index rising 7.4% year-on-year, the largest 12-month increase since the period ending in November 1981.

For casual dining, menu prices were up 9% from a year ago, while quick-service dining prices were up 7.3%. May marks the third month in a row that the cost of full-service items rose at a faster rate year-over-year than limited-service. Prior to this trend, it hadn’t happened since March 2020.

Here’s how inflation has moved up recently:

November

  • Index of food away from home: 5.8%
  • Quick service menu price: 7.9%
  • Full-service menu price: 6%

December

  • Index of food outside the home: 6%
  • Quick service menu price: 8%
  • Full-service menu price: 6.6%

January

  • Index of food away from home: 6.4%
  • Quick service menu price: 8%
  • Full-service menu price: 7.1%

February

  • Index of food away from home: 6.8%
  • Quick service menu price: 8%
  • Full-service menu price: 7.5%

March

  • Food outside the home index: 6.9%
  • Quick service menu price: 7.2%
  • Full-service menu price: 8%

April

  • Index of food outside the home: 7.2%
  • Quick service menu price: 7%
  • Full-service menu price: 8.7%

As restaurateurs raise prices in response to labor and commodity pressures, the industry continues to wonder when consumers will start to pull back. Acosta, a global provider of integrated sales and marketing services in the CPG industry, found that 54% of consumers dine out less often due to inflation. About 33% choose to reduce their selection of restaurants rather than exchange them.

Some brands have used the environment as an opportunity to showcase their value proposition. Domino’s has brought back its 50% off promotion in June as it seeks to boost traffic after a disappointing first quarter. Sonic recently released a new Summer Snacking menu with options starting at $1.49.

BTIG analyst Peter Saleh predicted this move last year. He noted that value offerings will re-enter restaurant menus as stimulus dollars fade and inflation further squeezes wallets.

“Value offerings and messaging have been scarce since the start of the pandemic, as many concepts have focused on driving the average check with more limited staples and menus,” Saleh said.

In other cases, restaurants have sought alternatives to raise menu prices. For example, Wingstop attempted to use the bird set by deploying Thighstop and testing a new chicken sandwich. He’s also gaining more control over the supply chain by pursuing price mitigation strategies with long-standing suppliers and potentially buying a chicken production facility or even building his own.

“We know that if we can minimize the volatility our brand partners are seeing in food costs, the pace of development will only accelerate,” said Wingstop CEO Michael Skipworth.

Overall, inflation in the United States rose 8.6% in May year over year, the largest 12-month increase since the period ending in December 1981.

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