Where are consumers eating? Exploring food-at-home vs. away-from-home trends through 2023
October 17, 2023 - By Rachel Kubik, Senior Content Writer for ARC
Consumer spending on dining out is a significant indicator of the consumer’s financial well-being. It tends to be one of the first indulgences when people have extra funds and one of the first reductions when finances are tight. And consumers are back at the service of their waiters. Food away-from-home sales took a substantial hit in 2020 due to the COVID-19 pandemic, but they’ve rebounded significantly, surpassing 2019 sales by a considerable margin.
Eating out, officially termed “food away-from-home” or “away-from-home dining,” plays a substantial role in U.S. retail sales and consumer spending, contributing approximately $975 billion in sales last year, according to a May report from FTI Consulting. Food away-from-home encompasses all forms of dining out, including fast food (often referred to as “quick service” today), casual dining, fine dining and prepared food delivery to homes. The U.S. Census Bureau labels this category as “Food Services and Drinking Places,” encompassing bars and cafes.
According to the Census Bureau, Americans spent 20% more at restaurants than on groceries last year. With grocery prices increased due to inflation, some people have decided to spend less on groceries and opt for the convenience of dining out, take out or delivery. The pandemic ending has also allowed for people to feel safer socializing and going back out for their meals.
The Consumer Price Index (CPI), which encompasses the prices of all items and serves as a gauge for economy-wide inflation, experienced a 0.4% increase from July to August this year, according to the U.S. Department of Agriculture Economic Research Service’s Food Price Outlook. In comparison to August 2022, the CPI saw a notable rise of 3.7%. Specifically, the CPI for all food demonstrated a 0.2% uptick between July and August this year, resulting in food prices that were 4.3% higher than those of August last year.
The extent of food price inflation differs significantly based on whether the food was acquired for consumption at home or outside the home. The CPI for food-at-home (e.g., grocery store or supermarket food purchases) experienced a mere 0.1% increase from July to August in the current year but stood at a 3% increase when compared to August 2022. On the other hand, the CPI for food purchased away-from-home (e.g., in restaurants) exhibited a more substantial 0.3% increase in August 2023 and was remarkably 6.5% higher than the prices observed in August 2022.
Food away-from-home is considered discretionary spending but is less sensitive to economic conditions than major purchases like furniture or electronics. Instead, it’s more akin to spending on entertainment categories such as theme parks, concerts or movies. Despite economic challenges and high inflation, food away-from-home spending has been on the rise in 2023, indicating that many Americans are willing to spend on eating out, despite budgetary pressures overall.
Consumers’ preference for dining out has been on the rise for years, driven by factors such as more dining options, diverse menus, food quality and the convenience of eating out vs. cooking at home. Despite challenges like worker shortages and rising costs, equity markets have shown favor towards the food away-from-home sector, which has outperformed the broader market. While there have been some bankruptcy filings in the retail sector, including food away-from-home in 2023, this seems more related to competitiveness issues at specific companies rather than an industry-wide problem or consumer spending fatigue, according to FTI Consulting.
In 2020, prices for food-at-home increased by 3.5%, paralleled by a 3.4% increase in food prices for consumption away-from-home, according to the Food Price Outlook. This convergence was primarily driven by the rapid surge in food prices for home consumption, while inflation in food prices for consumption outside the home remained within a 0.3 percentage point range of the 2019 inflation rate. Among all categories, the most substantial price increases were witnessed in meat, with beef and veal prices rising by 9.6%, pork prices by 6.3% and poultry prices by 5.6%. The only category that saw a price decrease in 2020 was fresh fruits, by 0.8%.
In 2021, there was a 3.5% rise in food prices for items consumed at home, while food prices for items eaten away from home increased by 4.5%. The CPI for all food witnessed an overall average increase of 3.9 percent throughout 2021. Notably, there were no reductions in the prices of any food categories in 2021 when compared to their 2020 prices.
Moving on to 2022, food prices surged by 9.9%. Prices for food-at-home rose by 11.4%, whereas food prices for away-from-home saw a 7.7% increase. All food price categories tracked by the USDA’s Economic Research Service experienced increases of over 5%, and each food category outpaced its historical average rate. An outbreak of Highly Pathogenic Avian Influenza (HPAI) significantly impacted egg prices, resulting in a substantial price increase of 32.2% between 2021 and 2022, the highest among all categories monitored by the USDA’s ERS. In contrast, beef and veal prices increased the least (5.3%) between 2021 and 2022 and generally decreased from their peak prices in November 2021.
The enduring strength of the labor market primarily contributes to robust consumer spending in this category, despite the federal reserve’s efforts to curb inflation. Since late 2021, food away-from-home spending has been on the rise as Americans have resumed their pre-pandemic dining habits and are eating out to their heart’s content. This increase in dining out is driven by consumers’ desire and their financial capacity to indulge, even as menu prices have significantly risen since the onset of the pandemic. Real monthly sales growth for food away-from-home has exceeded its long-term average rate since mid-2022. This resurgence reflects both the recovery of food away-from-home relative to other retail categories and the overall surge in retail sales since 2020.
Projections indicate that food prices overall are expected to continue their deceleration but not decline in 2024. In 2024, all food prices are forecasted to rise by 2.2%, with a projected prediction range of -2.6% to 7.3%. Food prices for at-home consumption are predicted to increase by 1.6%, with a projected range of -5.5% to 9.5%, while food prices for away-from-home consumption are expected to increase by 4.3%, with a projected range of 1.9% to 6.8%.
What does this mean for health and wellness professionals?
With less people going to grocery stores, retailers are modifying their marketing strategies. Advertisements highlighting convenience and other attributes will resonate with the audience that eats out. Retailers can also add new product lines that are convenient and made for being a supplement to socializing.
In summary, the food away-from-home sector remains strong, indicating that most consumers are financially comfortable enough to absorb inflationary impacts on their dining expenses, despite the challenges faced by the industry. The ongoing growth in consumer spending, including food away-from-home, continues to surpass the rate of inflation, and the sector seems fairly insulated from increased prices, suggesting other sectors of consumer spending are likely feeling the pinch.