It’s complicated: There’s no simple explanation that sums up the current moment. Instead, an array of factors that include geopolitical disruptions and weather events has driven up grocery prices. Meanwhile, restaurants have been able to adapt thanks to their ability to access ingredients at wholesale prices and economies of scale, adjust the ingredients they use, and lock in lower prices through forward contracts.
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Consumers’ desire to eat out is, in some cases, a practical one as 29% of consumers believe it's cheaper to order from restaurants than to buy all the items needed to cook a meal, and 27% said it costs roughly the same without the work, per a Popmenu consumer survey.
- Surprisingly, amid an environment with rapidly rising grocery prices, a number of companies, including Unilever and Kraft Heinz, are finding success rolling out premium products for at-home consumption, according to CNBC. Expanding their product mix so that it ranges from everyday items such as Heinz ketchup to premium offerings like Heinz 57 Collection infused honey with black truffle enables them to appeal to a broad array of customers, including upper-income people who still have money to spend but may be swapping dining out for premium ingredients to use at home.
Challenging times: Rising grocery prices haven’t helped all restaurant-related businesses as a number of startups have struggled in the wake of rising interest rates and investors’ cash drying up.
- Restaurant-software company Nextbite, online-ordering company ChowNow, food-tech startup Lunchbox, and ghost-kitchen startup Reef have all cut staff, per Insider.
- Meanwhile, many rapid delivery startups are struggling to survive. Getir and Gorillas have laid off workers, while Fridge No More, Buyk, Jokr, and 1520 shuttered their US operations.
Why it matters: The underlying force shifting consumers’ eating habits is their search for value. That’s why 58% of the most-watched ads across top restaurant brands from May through early August highlighted deals, prices, or mobile app or loyalty rewards, up from 46% from January through April, per an iSpot analysis reported by the Journal. To capture consumers’ attention, grocers and restaurants need to find novel ways to convey the value of their products.
Go further: Read our report on the Era of Uncertainty here.
This article originally appeared in Insider Intelligence's Retail & Ecommerce Briefing—a daily recap of top stories reshaping the retail industry. Subscribe to have more hard-hitting takeaways delivered to your inbox daily.