General Mills Predicts Restaurant Inflation Will Drive Fall Grocery Sales

General Mills predicted that with restaurant inflation exacerbating the gap between dining out and eating at home, more consumers will get their food at the grocery store this fall.

On a call with analysts Wednesday (Sept. 20) discussing the company’s first-quarter fiscal year 2024 earnings results, Mills CEO Jeff Harmening noted that even though we are not “technically” in a recession, consumer behaviors are mimicking those seen during recessions.

“Consumer behavior [shifts to] trying to economize, and so that may be going to smaller sizes and things like that,” Harmening said. “… But people aren’t eating less, and we don’t anticipate that they will eat less. … And now the cost of eating out is roughly four times what it is eating at home. And so, as consumers get more squeezed, and as people get in their normal routines in the fall, we would think that at-home eating will probably pick up a little bit.”

Restaurant prices continue to rise, with year-over-year restaurant inflation last month more than twice the increases seen in grocery, according to U.S. Bureau of Labor Statistics (BLS) data. Restaurant prices are up 6.5% relative to last year, and they have increased every month so far this year.

Many consumers have already cut back on dining out, according to PYMNTS Intelligence. Surveys of thousands of consumers carried out for the “Connected Dining” report noted that 58% of consumers made restaurant purchases in June, the most recent month on record, representing a 9 percentage point drop from May — the most pronounced decrease in monthly purchase percentages since last November.

Additionally, a PYMNTS survey of more than 2,300 U.S. restaurant customers late last year revealed that roughly a third of consumers have been making purchases from restaurants less frequently amid inflation. Restaurants have been noting this decline in traffic.

For General Mills’ own food service business, the company observed that restaurant traffic was roughly flat versus last year, with one exception.

“Quick-service restaurant traffic has been up, so there’s a move toward value in restaurants,” Harmening said.

Findings from a survey earlier this year, also for the Connected Dining report, revealed that 55% of Generation Z consumers, 47% of millennials and 44% of Generation X diners have been choosing restaurants with lower prices in response to inflation. Plus, only 5%, 8% and 10% of consumers in these generations, respectively, have made no change at all to how they engage with restaurants amid price increases.

As consumers turn to food-at-home options, many are springing for nonessential grocery items. General Mills noted in a presentation shared with investors that its U.S. snacks business grew 8% year over year in the quarter.

PYMNTS Intelligence from the latest installment of the series “New Reality Check: The Paycheck-to-Paycheck Report,” created in collaboration with LendingClub, revealed that three-quarters of shoppers buy “nice-to-have” items at the grocery store at least sometimes.