The Scoreboard
Commentary
- Last week we learned that… It might be a good time to wonder whether better economic conditions would actually boost restaurant sales in 2025. I think the answer could be “no” – for a couple of reasons. First, GLP-1 medication use continues to proliferate. On December 29, Cornell University published a new study detailing spending patterns for consumers using GLP-1 medications. Those consumers spent 4% less on meals away from home. That’s not huge, especially when considering that about 1-in-8 Americans are using GLP-1 medications, watering down the restaurant spending erosion to less than -0.5%. But it’s a headwind.
- Second, there’s no diluting the price effect. It’s not a new topic, and I’ve discussed it here more than once, but the cost of eating out continues to astonish. While preparing materials for winter speaking engagements, I went to the apps on my phone and created orders for some basic restaurant items occasionally enjoyed by the Plourd family. Two subs at Jimmy John’s, for example. Nothing fancy. Just a “Country Club” (#11) and “Beach Club” (#12). That adds up to $19.81 including Wisconsin sales tax. No extras. chips. No drinks. No cookie. Two subs. Just under 20 bucks. What about Panera Bread? A bowl of bacon mac & cheese and a “Chicken Bacon Rancher” sandwich ring in at $25.61 before tax. Pizza? A plain cheese extra-large New York crust pie at Papa John’s clocks in at $21.38 (tax included).
- Inflation data from the US Bureau of Labor Statistics shows menu prices up by 25% over the past four years. We’ve not seen that sort of four-year inflation since the early 1980s. Assuming our Jimmy John’s food followed the same pattern, what cost $19.81 a couple of weeks ago would have been $15.85. Based on the latest BLS wage data, private-sector workers are making 14% more than we were four years ago.
- Before the average consumer feels better about eating out with pre-Covid gusto, we’ll need to see restaurant prices go down and/or wages go up. I’m confident asserting that we won’t see prices move lower… because that’s never happened since BLS started publishing food-away-from-home inflation data in 1953. The best we can hope for is a leveling off while wages catch up. That will take time. In the meantime, various “deals” can boost sector performance here and there. Better consumer confidence might help drive incremental growth. And, finally, let’s not underestimate the laziness of the American consumer, a force with the potential to keep sales marginally afloat all other things being equal. But should we be bullish of the US restaurant sector as a driver of dairy, beef or pork demand? I don’t think so.
- As far as the week ahead goes, we’ll be able to get back on the regular data routine, notably with the Job Openings and Labor Turnover Survey report slated for publication on Tuesday and the Employment Situation report landing on Friday. In addition, the US Federal Reserve will publish its monthly Consumer Credit report on Wednesday.
For 2024, the S&P500 gained 23%. That’s impressive. It’s more than double the 50-year average of 11%. It ranks #15 on the list of best performances over the last 50 years. Here’s what’s even more impressive: the two-year advance came in at +53%, the fifth-best back-to-back showing in 50 years. While plenty of people are quick to (accurately) point out that “the stock market isn’t the economy and the economy isn’t the stock market” there’s little question that outsized performance in 2023 and 2024 helped propel confidence and spending in upper-income households at a time when lower- and middle-income households struggled.
Wacky calendar mismatches continue to muddle attempts to assess retail dairy and meat demand in any given week. So we’ll stick with our “holiday season” aggregate calculations. From the first week of November through the last week in December – weeks 45 through 53 in Circana’s dataset – volume sales of natural cheese and butter/butter blends gained about 2% year-over-year. Beef remained a big winner, with sales up nearly 6%. Pork and chicken volumes remained flat.
Retailers are kicking off 2025 with big savings on cheese. USDA data shows 11,783 outlets promoting six-to-eight-ounce shreds this week, up 4% on the week and down 12% year-over-year. Pricing averages $2.29 per package, down five cents on the week and down 10% year-over-year to the lowest level since late August. Butter promotional activity slips to 2,684 outlets, down 61% on the week and down 79% year-over-year. Average price moves up to $4.39 per pound, up 15 cents on the week but still down 10% year-over-year.
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