Menu prices will pose a dilemma for restaurants this year as operators struggle with rising commodity costs and consumers who remain focused on value, according to a new study by AlixPartners LLP.
In the turnaround firm's survey of 1,000 consumers in December, respondents said they expect to spend 5 percent less on each meal at restaurants this year, or an average of $12.90 per meal versus $13.60 last year.
In addition, 11 percent of respondents said they expect to spend $5 or less per meal this year, up from 6 percent who said the same thing last year. Sixty percent of consumers surveyed said they plan to use coupons and promotions to lower their tabs.
“From all indications, ‘the year of the meal deal’ looks like it may be turning into ‘the era of the meal deal,’” said Adam Werner, a managing director at AlixPartners and the head of the firm’s North American restaurant and foodservice practice. “The good news is, diners are coming back into restaurants, but they remain cautious and very price-sensitive.”
As restaurant operators face consumers who remain reluctant to spend, they also must contend with rising commodity costs, said Eric Dzwonczyk, a director in AlixPartner's restaurant and foodservice practice.
"Companies have two options," he said, "either absorb commodity price hikes or pass them onto consumers, and neither is preferable in the still-recovering U.S. economic environment.”
Restaurant operators voiced similar concerns in the recent NRN a.m. 2011 Restaurant Operator Survey. Of the more than 130 respondents, nearly 39 percent said higher commodity costs would pose the biggest challenge to their businesses this year. Another 20 percent said they were most concerned that consumer spending would remain stalled.
Still, nearly 60 percent of respondents to NRN's survey said they expect to raise menu prices this year, while only around 5 percent plan to cut prices.
In an overview of the restaurant industry, AlixPartners said the quick-service segment will struggle with increasing competition from convenience stores and a customer base that is more vulnerable in a shaky economy. On the other end of the spectrum, fine-dining restaurants are benefiting from an increase in business travel spending, the firm found.
Other findings in the AlixPartners study:
• Even as more restaurant brands beef up their digital marketing efforts, only 20 percent of the consumer respondents said their behavior was influenced by social media, online reservation sites, discount aggregators and other online tools.
• While saving money is the biggest reason cited by consumers who plan to dine out less frequently this year, 50 percent said they would cut back on restaurant visits in order to eat more healthfully.
“This focus on saving money, coupled with the desire to eat healthier will put pressure on companies to take a hard look at their menus and the price-value equation they’re presenting to the increasingly frugal and health-conscious consumer,” Werner said.
• While food quality remains important to consumers, AlixPartners said, 43 percent of respondents to the firm’s survey said they would trade down to less-expensive restaurants to save money.
Contact Molly Gise at [email protected].