GROCERY BILLS STILL GROWING FASTER THAN RESTAURANT CHECKS

On a sequential basis, YoY food at home CPI inflation increased by 60 basis points to 6% versus the 10 basis point gain in food away from home CPI inflation increasing 10 basis points to 2.7%.

 

Food inflation is now the most important household expense, according to WMT’s commentary during its 8/16 earnings call. Food prices, according to the Bureau of Labor Statistics’ CPI data released this morning continues to accelerate higher.  In August, food at home CPI increased to 6% on a year-over-year basis from 5.4% in July.  We are including two charts to illustrate food costs trends and food cost trends versus core inflation.  One callout we would make is that, the spread between food at home inflation and core inflation widened month-over-month while the spread between food away from home and core inflation narrowed.

 

Grocers like Whole Foods, where the customer is more loyal and willing to pay higher prices, are reporting no problems passing price through but other concepts where the price elasticity of demand may be higher will likely see more attrition as they look to protect margin.  To the extent that grocery inflation continues to outstrip price increases in restaurants, it should be a positive for comparable sales trends at restaurant chains.  Whether or not restaurant margins can withstand the pressure or not, however, remains to be seen.

 

GROCERY BILLS STILL GROWING FASTER THAN RESTAURANT CHECKS - food at home vs food away from home

 

GROCERY BILLS STILL GROWING FASTER THAN RESTAURANT CHECKS - food at home spread vs food away spread

 

 

Howard Penney

Managing Director

 

Rory Green

Analyst