Can’t anyone here cook anymore?
Why food companies, supermarkets are threatened by rise of takeout, drive-thrus, meal kits
Of all of the trends working against supermarkets and packaged food companies, one seems especially hard to surmount: people don’t want to cook anymore.
Americans have always eaten out. What has changed is the growth of restaurant meals eaten at home, both delivered and via take out or drive thru, and most recently prepared meal kits. According to Bureau of Labor Statistics, food spending for meals prepared at home grew by less than 2 per cent a year from 2013 to 2016 while spending on meals prepared elsewhere grew more than 20 per cent.
Americans have spent roughly 13% of their income on food for years. But for 2016, the last year for which U.S. data are available, they spent nearly 44% of those food dollars on food prepared away from home — a share just shy of the peak seen during the housing boom over a decade ago. As recently as 2013 that share was below 40%.
Part of that change is cyclical. Restaurant spending fell sharply during the recession. When consumer confidence is high and people have a few extra dollars in their pockets, they will pay someone else to do the cooking and dishes, or at least to prepare ingredients. But part of it is secular. Convenience is increasingly important and now encompasses rapidly growing web-based restaurant and meal kit delivery services like Grubhub and Blue Apron.
“All of a sudden the whole model is shifting away from home, but at the same time still at home,” says food industry expert David H. Stone, a managing partner at The New England Consulting Group. A handful of percentage points might not sound that significant for companies that make food such as Kraft Heinz or those that sell it like Kroger or Walmart, but it is. And these trends will likely continue.
The Food Institute looked at expenditures in 2013 and found that millennial households spent 6.5% more a week than baby boomer households on meals away from home despite having lower income overall. Baby boomers will spend less as they age if current demographic patterns hold. But today’s 35year-olds, who haven’t cooked much for themselves so far, will likely keep ordering as family demands squeeze their time and increase overall dollars spent.
Restaurants do, of course, buy food from divisions of some of the same manufacturers that stock supermarket shelves. But Mr. Stone notes that restaurants squeeze suppliers on price the same way supermarkets do.
Supermarkets are fighting back by acting like restaurants with more prepared foods and in-store seating. Coupled with rising sales for fresh meat and vegetables, there is hope for some of them. For packagedfood brands, though, the challenge is deeper.