Rising Food Costs Create Anxiety, Change Menus

Around the world, rising food prices are forcing cooks, home and professional alike, to reconsider how they prepare their foods.

Bloomberg reported Monday (March 28) that rising costs of everything from meat to feed is making it difficult for producers to keep up with demand, making many vegetable oils unaffordable and making some food businesses switch up the formula to cut back on high-cost items.

“You can only charge customers a certain price when it’s fast casual,” Joe Fontana, owner of Chicago fried chicken chain Fry the Coop, told the outlet. “My fear is that it’s going to get to a point where it’s the $15 sandwich.”

The U.S. Bureau of Labor Statistics (BLS) Consumer Price Index (CPI) shows that in February, prices for groceries increased 8.6% year over year. This increase marks the greatest 12-month increase since April 1981.

Read more: Highest Grocery Inflation in 40 Years has Consumers Running to Big-Name Brands

Price influences not only what consumers buy, but also where they shop. It is the top factor influencing consumers’ choice of grocer, according to data from PYMNTS’ study “Decoding Customer Affinity: The Customer Loyalty to Merchants Survey 2022,” created in collaboration with Toshiba Global Commerce Solutions.

Get the report: Decoding Consumer Affinity

The study, which drew from the results of a survey of a census-balanced panel of more than 2,000 United States consumers, found that 37% of consumers rank price above all other considerations when selecting a grocer to purchase from, a greater share than said the same of any other concern.

Amid these rising prices, major grocery and restaurant chains can leverage their scale to price out competitors, holding off on price increases for longer and leaving smaller players at a disadvantage.

“We talk about … our price leadership position … because prices are relative, and it’s more fluid in an inflationary environment like this,” Walmart U.S. President and CEO John Furner told analysts on an earnings call in February. “We think about things like opening price points and protecting for a lower-income family some of the things that they need from a staples point of view … We use rollbacks to communicate not only the reality of prices are coming down at some places, but the emotion or perception we want customers to have about us being there for them.”

See more: Walmart Parlays Consumer Price Concerns Into Grocery Share Gains

Additionally, on an earnings call with analysts Thursday (March 24) discussing the company’s third-quarter 2022 financial result, Darden Restaurants, parent company of Olive Garden and Longhorn Steakhouse, among others, shared that it is leveraging its scale to price out smaller brands.

Read more: Olive Garden Parent Prices out Competitors, Invests in Digital Pickup Ordering

“Obviously, we’re going to continue to look for opportunities to price below inflation,” said Raj Vennam, the company’s senior vice president, chief financial officer and treasurer. “As inflation creeps up, we’re going to have to try to manage through that, but it’s going to be a combination of pricing and productivity initiatives.”

For restaurateurs, even with all these challenges, inflation is still not the top anxiety plaguing the industry.

“That’s not what [operators are] worried about right now,” Andrew Robbins, CEO of Software-as-a-Service (SaaS) customer experience management (CXM) solutions provider Paytronix, told PYMNTS’ Karen Webster in an interview earlier this month. “It’s all about labor.”

See more: Labor Challenges Stifling Would-Be Restaurant Boom, Paytronix CEO Says