In Europe, COVID-19 concerns continue to decline, but according to NPD’s latest sentiment survey, one out of four European consumers claim they will continue to wait before visiting restaurants again. And more than one-third consider restaurants risky places to patronize. COVID-19 is still an import element of our day-to-day reality, but I am looking at this as an optimist as I see people returning to their usual pre-pandemic routines, and how the industry is recovering despite the challenges. We can expect continued improvements as the situation relaxes.

On the other hand, since the end of 2021, consumers have become much more negative about their personal financial situations. This month, half of Europeans expect their financial situations to worsen, up 10 points compared to April 2022. This is a tough pill to swallow, especially since our industry not only depends on whether people have money in their wallets; they also rely on people’s willingness to spend it.

And almost everybody not only sees and recognizes the price increases in restaurants, seven out of 10 also consider them higher than expected. This is a good example of perception clashing with reality because the numbers as measured by the statistical governments of the Big 5 Western European countries do not appear to be that high.

In July, restaurant inflation was measured at close to 8%, which is below total inflation and well below price increases for food in grocery. But, again, perception is reality in this case, and it certainly skyrocketed in a very short period. In normal times, we would say that it is good for the restaurant industry when we see prices in food retail increase. However, a restaurant meal is still on average three to five times more expensive than a meal prepared at home.

And price sensitivity has been increasing. Through NPD’s CREST, which looks at actual behavior, we see an increase in the number of visits to restaurants chosen because of price is increasing. Also in our sentiment survey, six out of 10 say that their financial situation affects their eating out habits, while two-thirds agree that affordability drives their choice.

And there were core behavior changes related to the Foodservice market we observed during the financial crisis. Consumers were trading down and trading out. Trading down is still much better because we – as an industry – do not lose a visit or meal. Consumers simply manage to make it less costly. Trading out means that the industry loses the whole visit and people either skip these occasions completely, or they prepare something themselves.

The difference between then and now is that, prior to the pandemic, eater checks grew constantly, usually a little above inflation. But over the past 12 months, price increases have been driving checks up in the very high single digits. And as just confirmed by our most recent sentiment survey, consumers expect to utilize these trading down strategies to manage the eater checks over the coming months; and it’s likely to be more significant today than during the financial crisis. In other words, we expect much larger trading down reactions!

Restaurant operators therefore need their own strategies to keep their customers and underline their price-value. We suggest strengthening loyalty programs, running targeted value promotions through more smart bundling and attractive menu combos while also keeping multi-tier pricing with low-price and premium products.

Finally, what we expect for the year ending 2022. Right now, our forecast shows a strong increase over 2021, but spend will be approximately 6% below 2019. Recovery from COVID-19 is still a much stronger growth driver than the limiting effects through inflation, economic uncertainty, and low consumer confidence. Still, average checks are helping the picture these days even as guest counts are lagging.

That said, those in the foodservice industry will want to make sure that concepts or products will be on the side of the market that will benefit from the trading down effects we anticipate.

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