For a long time, it seemed that restaurants’ growing share of the market could not be stopped, with younger consumers even more likely than their older counterparts to dine out. For decades, restaurant spending grew and grew, even surpassing grocery in 2017. Now, in response to the COVID-19 pandemic, the share of food spending has shifted back to grocery.
According to the USDA Economic Research Service, spending at “grocery stores, supercenters, convenience stores and other retailers (food at home)” increased from $63 billion in February 2020 to $73 billion in October 2020, while spending at “eating-out establishments” decreased slightly from $68 billion to $64 billion in October 2020.
With the grocery industry now receiving the majority of consumers’ total food spending, “the multi-billion-dollar question is, are we going to earn it?” That’s according to John Ross, president and CEO of the Independent Grocers Alliance (IGA), in a recent interview with Karen Webster. He later added, “there’s a whole series of social benefits and economic benefits to cooking at home that we hope will sustain. But as grocers, we now have to make sure that we earn that continued loyalty. We can’t just merchandise the same way we did before and expect them to continue to do it once all the restaurants are back.”
And that return of restaurants might come sooner than many grocers expect. As Noodles & Company CEO Dave Boennighausen told Webster recently, “Never discount the restaurant industry … we’re roughly flat versus where we were pre-pandemic. I think ‘21 will just be gradual improvement … [we’re] hoping for the new normal to show up probably around late Q3 and Q4.”
However, as the economy continues to suffer the blow dealt by the pandemic, grocery stores have an opportunity to hold onto their share of spending. Ross pointed out that the past year has seen “the largest growth in SNAP and WIC usage in our stores since the housing meltdown.” As consumers seek more affordable options to feed themselves and their families, independent grocers have an opportunity to hold onto consumers who may otherwise have returned to restaurants.
Economic projections may be in grocery stores’ favor. Per a Reuters survey last summer, two-thirds of economists surveyed said it would be well into 2022, at least, before the U.S. economy reaches pre-COVID-19 levels. CNN’s Back-to-Normal Index has found that the U.S. economy is “operating at 78 percent of where it was in early March,” with not one U.S. state reaching even 90 percent recovery.
Unfortunately for grocers, it may not take much of a recovery for consumers to act on their pent-up demand for restaurant dining. After the $900 billion COVID-19 relief package passed last December, restaurants saw an immediate sales spike. And with the $1.9 trillion COVID-19 pandemic relief bill already passed in the House, which includes $1,400 stimulus checks for many U.S. citizens, restaurants may see another boost in the near future.
Full recovery or not, consumers are eager to return to restaurants. PYMNTS data has found that 61 percent of consumers are interested in dining out in restaurants more often than they currently do. Moreover, consumers who make more than $100,000 a year were the most likely to indicate wanting to eat in restaurants more often, shortly followed by consumers in the middle-income bracket, indicating that as consumers trickle back into restaurants for on-premises dining, many will have disposable income to spend on meaningful culinary experiences.
It will take a concerted effort for grocers to maintain their share of consumer spending. Building loyalty with rewards programs, adopting easy and convenient technologies, and engaging consumers across channels, among other initiatives, can help maintain some of the share in the coming months, as the vaccine rollout brings more consumers back to their pre-COVID routines.
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