Favorable Conditions Continued In Fourth Quarter For Food Retailers

For the second consecutive quarter, sales for food stores and eating and drinking places moved higher than a year earlier according to exclusive Food Institute analysis

For the second consecutive quarter, sales for food stores and eating and drinking places moved higher than a year earlier according to exclusive Food Institute analysis of government data, aided by more sizeable gains than the prior months during November and December. At the same time, food-at-home price inflation resurfaced after falling into negative territory a year earlier, indicating retailers are beginning to pass along some price increases, albeit not the lion’s share of what they have been encountering at the wholesale level.

Based on this graphic, foodservice operators have been boosting prices at a greater rate than retailers. And just last week it was reported that the nation’s largest restaurant chain, McDonalds will raise prices as much as 3% this year. Both foodservice and food store operators have been dealing with higher food costs for the past 15 months as the Food Institute noted here one week ago, and price increases in both segments are anticipated this year.

Looking more closely at each segment The Food Institute noted:
Following a year of no growth in 2009, U.S. food and beverage stores wound up 2010 posting a 2.4% increase from the following year, according to government data analyzed by The Food Institute. The final two months of 2010 were among the most positive of the year, rising 3.4% and 3.5% respectively. And considering that retail food price inflation was minimal during those months, it indicates that more physical product was passing through checkout counters. Supermarkets, for which data lags a month behind, seemed to be following the upward trend but were not quite as positive. For example, during November, supermarket sales increased 3.0% while all food & beverage store sales increased 3.4% that month.

Eating and drinking places rang up nearly $41 billion in sales during December, up 6.2% from the same month last year. This was the largest such increase since March of 2008 and considerably greater than any other monthly increase this year. This helped bring overall 2010 sales at these outlets 3.1% over prior year levels, with gains at limited service or fast food outlets outpacing full service restaurants.

Ending the year on such a high note should bode well for 2011 as it may be indicative that consumers are returning to restaurants in greater numbers after closely monitoring their eating out expenses for the past 18 months or so.