Changing Dinner Plans: Inflation Alters American Dining Habits
As inflation continues to impact the cost of living, Americans are reevaluating their dining habits. Higher prices at restaurants and cafes are driving more people to choose cooking at home over dining out. This shift is reshaping the landscape of the food industry, affecting both grocery stores and restaurant chains.
For the first time in years, grocery hauls are getting bigger as consumers opt to buy more food for home cooking. According to federal data, grocery prices have increased by 1.1% over the past year, while the cost of restaurant meals has grown by 4.1%. Despite the slower rise in grocery prices compared to restaurant prices, both are still significantly higher than in recent years due to cumulative inflation.
Since mid-2020, the cost of groceries has surged by 19%, while restaurant prices have jumped nearly 24%. This substantial increase is prompting many Americans to recalibrate their spending, choosing to splurge on higher-quality groceries instead of frequenting restaurants.
The economic impact of rising prices is evident in the changing preferences of consumers like KD Deshmukh, an engineer from Tulsa, Oklahoma. To celebrate his spouse’s birthday, Deshmukh opted for a high-end seafood market to prepare a special dinner at home rather than dining out. “Instead of going to a restaurant,” he says, “we were like, ‘We are pretty good cooks — let’s go splurge on a better piece of salmon that we know came in fresh.’ And it’s a bit of a premium but definitely worth it.”
This sentiment is echoed by many Americans who are choosing to invest in premium groceries as a treat, balancing the need to save money with the desire for quality food.
Market research firm Circana has tracked this trend, noting that while many shoppers are reaching for cheaper store brands, a growing number are also upgrading to premium products. Sally Lyons Wyatt of Circana explains, “Because at least it’s a little treat. It’s a little reward of — all right, I’m cutting back in these places, but at least I can have something that I perceive to be better quality, better taste, better experience at home.”
Interestingly, despite higher grocery prices, shoppers are leaving supermarkets with more items than before, reflecting a shift in spending patterns. On the flip side, food purchases at cafes and other eateries have declined since the start of the year.
The impact on restaurants has been uneven. Sit-down restaurants saw an uptick in diners in May and June compared to the previous year, but reservations flatlined in July, according to OpenTable’s tracking. Fast-food chains are also experiencing mixed results. While KFC, Arby’s, and Buffalo Wild Wings saw fewer visitors in July, foot traffic at Burger King, Wendy’s, and Taco Bell increased.
Fast-casual chains like Chipotle, Shake Shack, and Panera are faring better, benefiting from the shift as more people choose their burritos, burgers, and sandwiches over pricier sit-down meals. However, McDonald’s is struggling, losing business from lower-income families who are cutting down on dining out and finding other ways to economize.
McDonald’s CEO Chris Kempczinski noted, “They’re dropping out of the market, eating at home, and finding other ways to economize, cutting down on trips.” Although the chain still attracts higher-income customers, it isn’t enough to offset the loss of lower-income patrons.
In response to declining sales, fast-food chains are rolling out more deals and promotions to attract budget-conscious diners. McDonald’s is extending its new $5 value meal through the summer and promoting deals like free fries for purchases made through its app. Despite not lowering regular menu prices, the chain is focusing on value promotions to maintain customer interest.
Starbucks is also offering more discounts and meal combos, aiming to convince customers that the Starbucks experience is worth the cost. CEO Laxman Narasimhan emphasized the importance of demonstrating value to customers who are now more mindful of their spending.
At the grocery store, consumers are selectively upgrading items for a better at-home dining experience. Common upgrades include wine, pasta sauce, and pizza dough. “The Italian night is still huge, especially the premium Italian night,” says Lyons Wyatt. “That night, I don’t think, will go away anytime soon.”
The current inflationary environment is reshaping how Americans approach dining, with more people opting for home-cooked meals over restaurant visits. This trend is impacting both the grocery and restaurant industries, prompting changes in consumer behavior and market strategies. As the economic landscape continues to evolve, the way Americans plan their meals will likely continue to reflect broader financial trends.
