Inflation and the economy were two major hot button issues as voters went to the polls this November. That’s because many voters and consumers believed that growth in wages didn’t keep pace with rising food costs and inflated prices for other goods and services.
Restaurant and food service prices are one way to quantify that sentiment, which the USDA tracks in the “food away from home” category. As shown in USDA’s chart below, spending on food away from home rose from 5.6% to 5.9% in 2023. This was the main reason total food costs continued to escalate in the past year.
Even though spending is up at restaurants, that doesn’t mean restaurants are doing particularly well. They have struggled to pass along higher labor, food, and operational costs to customers and retain them as frequent visitors.
The poor financial health of some restaurants and their patrons is a concern for dairy because cheese and other dairy ingredients are staples in restaurant menus. When purchases at restaurants sputter, dairy demand stalls, too.
Decade-high bankruptcies
“Restaurant chains and operators this year are on track to declare the most bankruptcies in decades outside of 2020, when the global pandemic upended the industry’s operations,” wrote The Wall Street Journal’s Heather Haddon, citing data and analysis from BankruptcyData.com. She went on to cite bankruptcy filings for Red Lobster, Hawkers Asian Street Food, Tijuana Flats, Rubio’s Coastal Grill, and Roti. “More eateries on the edge are likely to file for bankruptcy in the coming year, according to restaurant executives, attorneys, and lenders,” Haddon continued in her October 21, 2024, article “Empty tables and rising costs push more restaurants into bankruptcy.”
TGI Fridays was added to the list in early November when the restaurant chain filed for Chapter 11 bankruptcy protection in the Northern District of Texas. The company’s 39 restaurants were included in that court filing. However, 56 independent chains were not included as those are stand-along franchises, reported The New York Times.
That’s the financial health story. Then there’s consumer spending.
Even though USDA reported purchases for consumers in the food away from home category as up, that doesn’t mean more food was being sold. That’s the rub for dairy as an estimated 80% of cheese moves through restaurants.
“Same-store sales traffic at U.S. restaurants was down 3.3% this year through October 6 versus the same period in 2023, according to market-research firm Black Box Intelligence,” reported Haddon. “Visits to casual-dining restaurants fell 4.5%,” she continued.
This is why many restaurant chains have been promoting meal deals to try to lure in inflation-weary consumers still reeling from sticker shock and deflated wallets.
Spending up 12% on food away from home
USDA reported that food spending by U.S. consumers reached a record high of $2.57 trillion last year. At $7,672 per average American, food spending in 2023 rose 7.5% when compared to the previous year. The food away from home category fueled most of higher costs as it rose a whopping 12% in just one year as consumer spending climbed from $4,004 to $4,485 per person, reported USDA researchers in their report “U.S. consumers increased spending on food away from home in 2023, driving overall food spending growth.”
At the same time, food-at-home spending rose just 1.8% to $3,187 per capita. That means food away from home dining options accounted for 58.5% of total food spending. Again, that expenditure didn’t mean that diners got more food at these venues . . . it just meant that they spent more money and didn’t necessarily buy more dairy.
