Gas prices have exploded, rising on average about $1.40 a gallon in just a few weeks. And that, a new study from Technomic finds, is hurting restaurants. What consumers are being most affected? Those in the 18-to-24 age bracket. Least affected? No surprise: Those earning $150,000 or more a year.
Technomic surveyed consumers, and 49% said they are reducing their spending at limited-service restaurants, 48% at full-service restaurants. Spending on entertainment, in general, is being cut by 47% and leisure travel by 44%.
None of this is particularly good news for bev/al marketers. To be sure, there will be some shifting from on-premise bev/al sales to off-premise, but on-premise historically has been where people were willing to spend more for bev/al. It’s also where new brands are introduced and where consumers go to learn about new products.
The last time gas prices averaged more than $4 per gallon nationally for an extended period was in May through July 2008. Looking at this period compared to the same period in 2007, Technomic found there certainly was a drawback in LSR and FSR sales. But the change is more drastic within full-service restaurants compared to limited service, which were down 4.3 points and 2.2 points in 2008 on inflation-adjusted bases, respectively.
Technomic notes that when consumers feel financially challenged, “they don’t typically trade out of food service but rather rather, they trade down. Instead of frequenting a higher-end restaurant restaurant, a consumer may opt for a less expensive casual dining dining or fast-casual experience. Or, instead of visiting a sit-down casual-dining restaurant, they move to a quick-service restaurant instead of a wholesale shift to more at-home meals.”
But each notch down results in a change in alcoholic beverages available on premise.