Olive Garden Parent Eschews Heavy Discounts Despite Consumer Demand

Olive Garden Parent Avoids Discounts Despite Consumer Demand

As consumers seek out discounts to help ease their anxieties about restaurant price inflation, Darden Restaurants is sticking with less discount-focused marketing efforts.

On a call with analysts Thursday (June 22) discussing the brand’s third-quarter 2023 financial results, Rick Cardenas, president and CEO of the company, owner of a range of popular full-service restaurant (FSR) brands, including Olive Garden, LongHorn Steakhouse, recently acquired Ruth’s Chris Steak House and others, discussed the company’s strategy.

“We look at what the competitor’s doing, and you’re seeing some promotional activity,” Cardenas said. “Our strategy remains the same on the marketing side. We’re going to continue advertising Olive Garden, … but … we don’t necessarily expect to go back into the deep discount craze.”

Instead, the company will focus on advertising to make consumers aware of the brand’s “competitive advantages,” he said.

This strategy is surprising, given the widespread demand among consumers for discounts.

Findings from PYMNTS’ study, “Connected Dining: Consumers Like the Taste of Discount Meals,” which drew from a survey of more than 1,800 U.S. consumers in February, revealed that the share of consumers redeeming discounts on their restaurant meals is up 86% this year, with 26% of diners reporting having used a discount on their most recent restaurant purchase, up from 14% in March 2022.

The study also found that 60% of restaurant patrons said deals and discounts are now more important factors to consider when choosing a restaurant. Plus, since the time of the survey, restaurant prices have only continued to climb, such that each of these figures is likely higher today.

Still, Cardenas contended that, even as cost pressures mount, consumers will continue to dine out, discount or no discount.

“There’s a tension between what people want, what they can afford, and even in a slowing economy, consumers really continue to seek value,” Cardenas said. “And it’s not always about low prices. It’s about execution. They’re making spending tradeoffs, and … food away from home is really difficult to give up if [we’re] executing.”

Yet despite this contention that consumers continue to spring for full-service dining whether they are drawn in by discounts, the company saw a year-over-year decline in traffic and a decline in alcohol sales in its fine dining restaurants. Comparable restaurant brands have been seeing softening amid inflation. However, Darden maintained that both of these are a result not of consumer pullback but of a difficult comparison, arguing that Q3 2022 saw a surge.

The brand especially saw softening with lower-income and younger consumers, suggesting that pulling back may have more to do with diners’ budgetary pressures than the company is letting on.

Raj Vennam, Darden’s chief financial officer, noted that retention among consumers younger than age 35 is lower than last year, while among those 55 and over, retention is “similar to last year.” Similarly, lower-income diners are down relative to last year, while higher-income groups are “flattish.”