CPI Beats Lowered Expectations

Wall Street is celebrating that inflation didn’t continue its 3 month upward trend in March, breaking the pattern with a blip down from 3.5% to 3.4% in April. Food Away from Home took the same modest blip down led by Limited Service, which dropped below 5% - leveling out at the lowest since August 2020. Not so for Full Service which had a slight tick up.

It’s been a mixed bag for restaurant traffic performance. Overall the industry has been losing customer counts for the better part of 2 years now, but has been able to report same store sales gains from price increases. In fact, if you look at the industry’s growth trajectory from 800B to $900b and expected $1T in revenue – about $300 billion of that is from higher prices with fewer customer visits.

Lower inflation is good for everyone, but frankly it creates a harder environment for restaurants to set prices. Increasing prices going into inflationary periods is easy, on the back of that cycle it can be very unforgiving. We’re well past inflation fatigue and into inflation anger (there is no acceptance stage in the phases of inflation grief, sorry Kubler Ross). The census pulse survey indicates that over 70% of Americans find inflation ‘somewhat or very stressful’. 

That’s down very slightly from the last survey – but still up from last year despite inflation being lower. Inflation & pricing is not just about math – it’s fraught with emotion, and food & hospitality actives senses and emotion. Consumers aren’t completely checked out of restaurants, they are more conscious about where they spend their money and when the price/value is out of whack they move on – most of them silently. It’s been interesting to see the big winners and the big losers of the past 6 months. Some common threads for the winners appear to be a concentration on improving service times, and experience.

Read the original post and subscribe for updates here.