The historic inflationary environment facing restaurant consumers continued in May, with the food away from home index rising 7.4 percent year-over-year—the largest 12-month increase since the period ending November 1981.
For casual dining, menu prices rose 9 percent compared to last year, while quick-service meal prices rose 7.3 percent. May marks the third month in a row that the cost of full-service items increased at a higher rate year-over-year than limited service. Prior to this trend, it hadn’t happened since March 2020.
Here’s how inflation has progressed recently:
November
- Food away from home index: 5.8 percent
- Quick-service menu prices: 7.9 percent
- Full-service menu prices: 6 percent
December
- Food away from home index: 6 percent
- Quick-service menu prices: 8 percent
- Full-service menu prices: 6.6 percent
January
- Food away from home index: 6.4 percent
- Quick-service menu prices: 8 percent
- Full-service menu prices: 7.1 percent
February
- Food away from home index: 6.8 percent
- Quick-service menu prices: 8 percent
- Full-service menu prices: 7.5 percent
March
- Food away from home index: 6.9 percent
- Quick-service menu prices: 7.2 percent
- Full-service menu prices: 8 percent
April
- Food away from home index: 7.2 percent
- Quick-service menu prices: 7 percent
- Full-service menu prices: 8.7 percent
As restaurant operators raise prices in response to labor and commodity pressures, the industry continues to ask when consumers will start pushing back. Acosta, a global integrated sales and marketing services provider in the CPG industry, found 54 percent of consumers are dining out less often due to inflation. About 33 percent are choosing to trade down in their restaurant selection as opposed to trading out.
Some brands have used the environment as an opportunity to showcase their value proposition. Domino’s brought back its 50 percent off promotion in June as it looks to boost traffic after a disappointing first quarter. Sonic recently released a new Summer Snacking Menu with options that start as low as $1.49.
BTIG analyst Peter Saleh predicted this movement last year. He noted that value offerings are going to re-enter restaurant menus as stimulus dollars fade away and inflation squeezes wallets further.
“Value offerings and messaging have been scarce since the pandemic began, as many concepts have focused on driving the average check with core products and more limited menus,” Saleh said.
In other cases, restaurants have searched for alternatives to bolstering menu prices. For example, Wingstop has attempted to use the entire bird by rolling out Thighstop and testing a new chicken sandwich. It’s also taking more control of the supply chain by continuing price mitigation strategies with longtime suppliers and potentially buying a chicken production facility or even building its own.
“We know that if we can minimize the volatility that our brand partners see in food costs that the pace of development will only accelerate,” said Wingstop CEO Michael Skipworth.
Overall, U.S. inflation increased 8.6 percent in May year-over-year, the biggest 12-month increase since the period ending December 1981.
