Kraft Bets on QSRs Despite More Consumers Turning to Grocery Stores

Kraft Heinz is banking on QSRs’ growth even as inflation has consumers cooking at home.

The Chicago-based food and beverage giant said on a call with analysts Wednesday (Feb. 15) discussing its fourth quarter 2022 financial results that it is looking to grow its presence in restaurants.

“We are in fact expanding distribution across all areas of foodservice,” Executive Vice President and Chief Financial Officer Andre Maciel said. “We have expanded in new restaurants, [such as] Denny’s, [where we’ve] increased the number of items we sell [to] them, and QSR, which continues to be a focus for us as a company from Papa John to Pollo Tropical — places in which we are actually now expanding number of SKUs we sell into. It’s an area that we continue to be bullish on and one of the places that we feel that we can be winning globally.”

The decision to go all-in on food service comes in spite of recent trends of consumers shifting away from restaurant meals toward grocery to get their food needs met amid rising prices.

Research from PYMNTS study “The 2022 Restaurant Digital Divide: Restaurant Customers React To Rising Costs, Declining Service,” which draws from a census-balanced survey of more than 2,300 U.S. restaurant customers in November, reveals that anywhere from 67% to 88% of diners, depending on generation, report having made changes to their restaurant spending in response to inflation. The most popular change cited was purchasing from restaurants less often.

Indeed, even lower-priced restaurants are noticing the shift. For instance, even quick-service restaurant (QSR) giant McDonald’s reported on its latest earnings call that consumers trading down around the world. This trend comes despite United States Bureau of Labor Statistics (BLS) data revealing that restaurant prices are inflating less than grocery. January’s data, released Tuesday (Feb. 14), shows that grocery prices rose 11.3% while restaurant prices only grew 8.2%.

Notably, consumers do not notice restaurants’ moves to keep inflation low relative to grocers. Supplemental research from the Digital Divide study showed that, on average, the price increases observed by consumers amount to 24% both for full-service restaurants (FSRs) and for QSRs. In contrast, data from the January edition of PYMNTS’ Consumer Inflation Sentiment study, “Consumer Inflation Sentiment: Perception Is Reality,” revealed that consumers on average see grocery prices as having risen 22%.

Yet, Kraft Heinz continues to see growth from food service sales despite consumers being in a period of cutting back on their restaurant spending. The food company saw the channel grow more than 20% last year.

“Foodservice remains an attractive channel for us, and we are very encouraged by the growth we have seen,” CEO Miguel Patricio said.

Certainly, in spite of economic pressures, many consumers continue to turn to restaurants to get their day-to-day food needs met. PYMNTS research reveals that the majority of restaurant purchases are low-ticket ones. In fact, about two-thirds amount to less than $20, according to additional research from that same Digital Divide study, while only 9% are more than $50.

While inflation may be a bump in the road for restaurant sales, overall, consumers have been ordering more food for at-home consumption in recent years. PYMNTS research finds that 36% are ordering via mobile order-ahead more often than they did before March 2020, 32% are ordering via a restaurant’s website more often, 32% are pickup ordering via phone call more often and 28% are ordering more for delivery via aggregators.