SKYROCKETING GAS PRICES - What does this mean for restaurants? TECHNOMIC'S TAKE - Winsight
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TECHNOMIC’S TAKE
SKYROCKETING
GAS PRICES
What does this mean
for restaurants?
By Joe Pawlak, Managing Principal
March 17, 2022
Image Source: Shutterstock.com ©2022 Technomic, Inc.
SKYROCKETING GAS PRICES
Starting last spring, prices across plus per gallon, has an impact on
the board began to rise as sharp consumer restaurant spending. Every 50-cent
increases in demand for goods To understand the current
and labor intertwined with supply conditions, Technomic conducted
increase in gas
chain disruptions. No particular an overnight survey on March 10, price has a $68
industry, product or service has 2022, with 475 consumers ages
been spared by rising costs 18 and older nationally who drive billion impact on
which have been passed along to gas-powered vehicles. consumer spending.
consumers. The rate of consumer
inflation continued to rise to a 7.9%
annual increase in February, the Consumer Pain has lower discretionary income.
largest jump since 1982, according Based on our survey, a whopping Not surprising, those with an
to the Bureau of Labor Statistics. 86% of consumers say that income of $150,000 or more
Foodservice menu prices have rising gas prices are having an annually are least impacted.
also been skyrocketing in this effect on their spending on other
environment, driven by higher raw goods and services, and half
material and labor costs. Despite say that gas prices are having a Spending Cuts
this, consumers have continued significant impact. Americans use about 135 billion
to accelerate foodservice gallons of gas per year.* As
spending since the nadir of the such, every 50-cent increase
pandemic, propelled by pent-up results in a $68 billion impact on
demand and economic recovery. Impact of Rising consumer spending. For many
In addition, grocery price Gas Prices consumers, cutting back on
proliferation has provided no driving is a nonstarter. Using cars
On Spending on Other
relief nor reason for consumers is a necessity to get to and from
Goods and Services
to shift to the at-home channel. Impact of Rising Gas Prices on Spending on Other Items and Services work or school, run errands and
Gas prices have been elevated as conduct their normal mandatory
No activities throughout the day.
the pandemic waned, however, Impact
until recently, they have not been 14% Therefore, spending cuts are
particularly problematic. Price has Significant
made in other areas to adjust for
ranged from the low- to mid-$3 per Some
Impact higher prices.
50%
gallon over the past 12 months. Impact
Restaurants and other leisure
36%
However, the incursion into activities are the main areas
Ukraine has precipitated a major where consumers say they are
spike in oil prices, driving up gas at cutting back due to high gas
the pump to much more than $4 Base: 475 consumers who drive gas-powered prices. This is not surprising
per gallon on average nationally, vehicles
as these are typical spending
Source: Technomic
up $1.40 over the same period last areas where consumers
year and over 70 cents over the indicate that they cut back
past few weeks alone.* on when their own financial
The data show that the youngest prospects become tenuous,
Historical experience has shown
Americans—18- to 24-year-olds— including periods of recession
that a spike in gas prices,
are most impacted as this group or other economic uncertainty.
especially those that result in $4-
*US Energy Information Administration
©2022 Technomic, Inc.SKYROCKETING GAS PRICES
Spending Limited-service restaurant 49%
Cutback Areas Full-service restaurant
Entertainment
48%
47%
Multiple mentions Leisure travel 44%
accepted Delay of large purchases 36%
Clothing 36%
Groceries 29%
Household goods 20%
Streaming services 20%
Base: 408 consumers impacted by
Household services 17%
higher gas prices
Source: Technomic I’m not cutting back spending 8%
Gas Price Spike
Impact Real Segment
Although an almost equal Growth Rate
number of consumers say they
will cut back on limited service 2008: May-July
and full service, history has
shown that full service is more LSR FSR
affected. The last time when
gas prices averaged more than -0.4%
$4 per gallon nationally for an $4.02*
extended period was in May
through July 2008. -2.1%
Looking at this period compared
to the same period in 2007, 2007: May-July
there is certainly a drawback
in LSR and FSR sales. But 2.3%
the change is more drastic 1.8%
within full-service restaurants
compared to limited service, $3.09*
which were down 4.3 points and
2.2 points in 2008 on inflation
LSR FSR
adjusted bases, respectively. Image courtesy of Alex Haney on Unsplash
Source: US Energy Information
Administration; Bureau of Labor Statistics; Restaurant and other leisure
Technomic
*Note: Average weekly retail gas price
activities are the main areas
Fuel icons created by Freepik where consumer say they
are cutting back due to high
gas prices
©2022 Technomic, Inc.SKYROCKETING GAS PRICES
Final Words:
Technomic’s Take When consumers feel financially
Prior events and data support challenged, they don’t typically trade
Technomic’s view that when out of foodservice but rather, they
consumers feel financially
challenged, they don’t typically trade down.
trade out of foodservice but
rather, they trade down. Instead
of frequenting a higher-end have fewer dollars in their almost a year, and pump sticker
restaurant, a consumer may pockets, they still require the shock could be less dramatic
opt for a less-expensive casual- benefits offered by restaurants as consumers are accustomed
dining or fast-casual experience. and other foodservice to seeing higher prices across
Or, instead of visiting a sit- establishments. Consumers still the board.
down casual-dining restaurant, need convenience, experience, One thing that the pandemic has
they move to a QSR. This time-savings, relaxation and taught us is that using restaurants
sliding down on the price scale socialization—all things that and foodservice is a deep-
occurs, rather than a wholesale restaurants offer. And, despite rooted habit for Americans—and
shift to more at-home meals. reports to the contrary, many still Americans will continue to find
Consumers also economize don’t want or have time to cook. ways to enjoy its perks despite
when eating out by foregoing The current surge in fuel prices any external challenges.
extras such as add-on desserts, could also have a different
appetizers and beverages. impact than in the past,
Even though costs may be however. Consumers have been
going up and consumers may experiencing high inflation for
Since 1966, we’ve produced in-depth research
focused on the foodservice industry.
We provide insights into consumer, industry and menu trends in the U.S., Canada and 23 countries
around the world. Our team of experts helps leaders in the industry make complex business
decisions, set strategy and stay ahead of the curve.
Contact us to learn more, info@technomic.com
©2022 Technomic, Inc.You can also read
