Restaurant industry insights and price forecasts for 2024
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The last few years have been very challenging for the restaurant industry, with inflation, supply chain disruptions, and labor shortages disrupting the restaurant food supply. As we enter 2024, promising signs of relief are on the horizon, but inflation and wage pressures will continue to impact in the upcoming year.
Here is what you need to know about the restaurant industry predictions for 2024 and its potential implications for restaurants and patrons alike
Inflation slowdown and price pressure easing
After three turbulent years, the restaurant industry finally received some much-needed relief in 2023.
The supply chain issues, slower food price inflation, and labor market improvements have all contributed to easing the pressure on the industry. Although prices may continue to slow down in 2024, they shouldn’t decline.
In March 2023, the peak was 8.8% YoY, but price pressure is now retreating. According to the USDA, food inflation should slow to 3% in 2024, which is half the inflation rate in 2023.
Additionally, interest rates should fall slightly. There has been a significant drop in delivery times, and freight rates have significantly reduced, leading to eased supply chain pressures.
USDA food price predictions for 2024
The latest USDA food price outlook suggests that in 2024, food prices will increase by 1.2 percent, with a projected range of -2.0% to 4.7%.
Food-at-home prices are forecasted to decrease by 0.6 percent, with a prediction interval of -5.3% to 4.6%, and food-away-from-home prices will increase by 4.9 percent, with a prediction interval of 3.2% to 6.6%.
The report predicts that in 2024 grocery food prices will increase by 1.6 percent, with a prediction interval of -4 % to 7.8%. Restaurant food prices should increase 4.3 percent, with a 2.3% to 6.3% prediction interval.
The forecast anticipates the most significant price increase in 2024 for meat, with a rise of 5.6 percent, followed by processed fruit and vegetables (4.7 percent) and poultry (3.3 percent). The most significant price decrease will be seen for eggs (-14.7 percent).
According to the latest USDA food price outlook, the cost of fresh fruits and vegetables will rise by 0.4 percent in 2024. On the other hand, prices for crops like corn, soybeans, and wheat will decline.
Labor still poses challenges as wage pressures persist
In 2023, the labor shortage that has significantly impacted the restaurant industry during the pandemic has eased. According to the Bureau of Labor Statistics, restaurant and accommodation job openings declined from 8.2% in 2022 to 6.7% in August 2023, while the quit rate fell from 5.3% in July 2022 to 3.9% in 2023.
However, unfortunately, labor shortage improvement is being overshadowed by the increasing labor costs. This problem is further exacerbated by minimum wage increases in some states, which will pressure operators to raise prices.
As labor costs remain much higher than the industry growth rate, some table service restaurants are moving towards quick-service operating models to cut down on labor needs.
Experts anticipate that labor will continue to pose challenges for the restaurant industry in the following year as operators will adapt to persistent wage pressures and find ways to strengthen recruitment and retention efforts.
Consumer enthusiasm is still strong despite price fatigue
Although some consumers have experienced price fatigue due to significant price increases in the past few years, the overall enthusiasm for restaurant experiences remains strong.
In the last few years, restaurant prices have increased faster than the overall inflation rate. According to the U.S. Bureau of Labor Statistics, menu prices have increased 7.7% over the past year, whereas the consumer price index rose 3.7%.
Over four years, the increase in menu prices is closer to 25% or 30%. This significant increase is taking its toll on consumers, who may begin to adjust their spending patterns.
However, throughout 2023, consumers have prioritized spending on experiences rather than buying things, and this trend will continue throughout 2024.
Consumers will continue to eat at restaurants, but some might aim to reduce their bill by choosing a cheaper option, skipping a course, or switching to takeout meals. Weaker brands will be most affected by these changes.
2024 outlook and strategies for the restaurant industry
The broad outlook for 2024 is cautiously optimistic. As the industry leaves behind inflationary fears, restaurants with streamlined supply chains and implemented cost controls will
Increased efficiency with the help of technology
Cost management, increased efficiency, and flexible menu offerings are essential, as operators must adjust to industry challenges while minimizing price increases.
The customer experience will continue to be influenced by technology, as it has become increasingly important in the restaurant industry. According to the NRA, digital orders accounted for 15% of total orders placed in August 2023, compared to only 5% in February 2020.
Mining customer data is another intelligent use of technology in the industry. Collecting and analyzing data on every transaction can help restaurants maximize their sales by allowing them to make informed decisions about restaurant operations, from inventory management to menu items.
Creating loyalty and value to attract customers
Beyond processing transactions, digitalization in the restaurant industry will encourage operators to cultivate digital engagement with customers, creating loyalty and value.
Cultivating customer loyalty will become vital for restaurant businesses as consumers become more price-conscious and selective in spending habits. Consumers are also increasingly choosing businesses that resonate with their values, so having a clear purpose and mission will benefit restaurants and help them stand out.
Key findings for the 2024 restaurant industry forecast
- Inflation Slowdown: in 2024, the restaurant industry will find relief with slowing inflation, improved supply chains, and a more favorable labor market;
- Tech Integration: technology plays a pivotal role going forward, supporting businesses to maximize sales, increase efficiency, and foster loyalty;
- USDA Predictions: USDA anticipates a 1.2% overall increase in food prices;
- Labor Challenges: while the labor shortage eases, rising costs persist, urging operators to adopt efficient models;
- Cautious Optimism: the industry outlook is cautiously optimistic, favoring restaurants with streamlined supply chains, efficient operations, and a tech-forward approach to customer engagement in 2024.
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