Diners skipping restaurants in U.S. and making more meals at home as the inflation trend inverts

NEW YORK (AP) — Eating in is in and eating out is out.

That's the message that inflation-squeezed consumer s have been sending to fast-food companies and other restaurants. Meanwhile food producers are benefitting from more palatable prices in grocery store aisles.

Inflation has been easing broadly for more than a year now, and it's been cooling faster for grocery items since the middle of the year. The current trend marks a reversal from previous years when grocery inflation outpaced restaurants as food producers raised prices, often fattening their profit margins.

The shift has been weighing on McDonald's, Olive Garden owner Darden Restaurants, and similar chains.

Orlando-based Darden reported a 1.1% sales drop at restaurants open for at least a year. The decline was a more severe 2.9% at the Olive Garden chain. July was especially weak.

McDonald's reported a 1.1% drop for that same sales measure during its second quarter, compared with an 11.7% jump a year prior.

“You are seeing consumers being much more discretionary as they treat restaurants,” said McDonald's CEO Christopher J. Kempczinski, in a call with analysts following the earnings report. “You’re seeing that the consumer is eating at home more often. You’re seeing more deal seeking from the consumer.”

Both Darden and McDonald's are offering more bargains to entice cautious consumers. Olive Garden has brought back its “never ending pasta bowl," while McDonald's introduced its $5 value meal deal.

Consumers have been focusing more on groceries and eating at home, and that's driving sales volumes for companies like General Mills, which makes Cheerios cereal, Progresso soups and Haagen-Dazs ice cream.

“We did anticipate that might be the case as we see consumers taking value,” said General Mills CEO Jeffrey L. Harmening in a call with analysts. “Consumers are still economically stressed, so that played out the way we thought.”

Source : https://www.usnews.com/news/business/articles/2024-09-26/diners-are-skipping-restaurants-and-making-more-meals-at-home-as-inflation-trend-inverts

Comprehension

What trend are consumers following due to inflation, according to the article?
How has inflation been changing for grocery items recently?
Which restaurant chains have been negatively impacted by the shift in consumer behavior?
What was the sales drop percentage for Olive Garden during the year?
How did McDonald's sales compare between the recent quarter and the previous year?
What strategies are McDonald's and Olive Garden using to attract cautious consumers?
Which food company has benefited from consumers choosing groceries over eating out?
How did General Mills’ CEO describe the impact of consumer behavior on their sales?

Discussion

Why do you think more people are choosing to eat at home instead of going out to restaurants?
How might inflation affect different kinds of businesses in the food industry?
Do you think the value deals offered by fast-food restaurants will help them recover from the sales drops? Why or why not?
What other strategies could restaurants use to encourage customers to dine out?
Why do you think grocery store prices are becoming more appealing to consumers now?
How might changing consumer behavior due to economic stress impact long-term trends in the food industry?
What is the significance of companies like General Mills benefiting from this shift, and how might they continue to adapt?
How do you think inflation and economic stress affect the quality of food people eat at home versus at restaurants?
In your opinion, what other industries might be affected by the changes in consumer spending due to inflation?
How do you manage food costs when inflation makes dining out more expensive?

Vocabulary

Inflation – The general increase in prices and fall in the purchasing value of money.
Discretionary – Optional; something that consumers can choose to do or not.
Profit margins – The difference between the cost of making a product and the money earned from selling it.
Sales volume – The number of units sold or the amount of sales generated by a company.
Palatable – Acceptable or agreeable to the taste or mind.
Value meal – A combination of menu items sold together at a lower price.
Bargain – Something bought or offered at a cheaper price than usual.
Anticipate – To expect or predict something will happen.
Economically stressed – A situation where people are financially struggling.
Entice – To attract or tempt someone to do something by offering something appealing.