Restaurant Sales Growth Negative; traffic New Low Since February
Data through the week ending January 16, 2022
The industry posted its best sales growth in the last four weeks; however, sales were not positive. Even with some sales improvement, traffic growth dropped to the worst levels since February of 2021. Fine dining experienced the most significant decline in traffic growth compared to the previous week, followed by casual dining and family dining. Quick service and fast-casual were the only two segments able to improve traffic growth compared to last week. Only limited-service segments (quick service and fast-casual) achieved positive sales growth for the last two weeks. A sharp downturn in dine-in sales occurred across all segments as concerns for new Covid cases continued is a big negative for Casual Dining. Only 30 states posted positive sales growth during the week. The best performing regions were the Midwest, Florida, New England, and the Western region based on sales growth. The worst was Southeast, Mid-Atlantic, Southwest, and California (-2.3%).
GoPuff
Digital convenience store company GoPuff has started to open its micro-fulfillment centers to the public, including locations in San Francisco, Texas, and Florida, including 161 BevMo! Stores in California, Arizona, and Washington and 23 Liquor Barn locations in Kentucky in 2021. The company is rumored to go public in 2022, so a more aggressive retail expansion plan in 2022 is likely (organically and via acquisition.) From a size perspective, the average Gopuff center is roughly 12,000 square feet, about the same size as CVS' expected retail closures – so as Gopuff continues its brick and mortar expansion, the company is a clear one to watch for those who could pursue some of these vacated locations. The average Gopuff location is roughly 12,000 square feet, about the same size as CVS.
AVOCADO PRICES SOAR (CMG)
This can have an impact on CMG
With truck rates continuing to make new highs, produce prices with included freight costs are increasing. Food retailers weigh lower produce inventories rather than filling the shelves at any cost. Due to greater demand during the pandemic, higher sell-through rates have been one of the largest tailwinds to grocers' gross margins through lower shrink. When a particular produce item is in demand retailers, do not have a choice but to order the item and pass on the price increase. Avocado prices for the third week of the year were 40% higher than any other year, as seen in the chart below. Headed closer to the Super Bowl, the crop may hit record prices when avocado prices typically rise.
The company's commentary from 3Q21 did not mention pressure from avocado prices. Will be an incremental headwind in 1Q22.
- Our supply chain team has done an outstanding job navigating the numerous industry-wide disruption, which led to food costs being 30.3% in Q3, a decrease of 200BPS from last year
- This was due primarily to leverage from menu price increases, which are partially offset by higher costs associated with beef and freight that unfortunately are continuing to worsen
- It's hard to predict how much of these headwinds will ultimately be temporary vs. permanent, but they are likely to persist for the foreseeable future
- In addition, Q4 will also include the higher-cost brisket LTO, which collectively will result in our food costs being in the low 31% range for the quarter
