The U.S. Census Bureau reported that total retail sales increased in August, as did sales at foodservices and drinking places. Starbucks begins introducing its numerous changes. Burger King will invest $400 million in updated restaurants and advertising over the next 2 years. These stories and a whole lot more This Week in Foodservice.
Total retail sales rose 0.3 % in August according to the Bureau’s advance estimate. Compared to August of last year sales this year increased by 9.1%. The Bureau revised the June 2022 to July 2022 period from virtually unchanged (0.0%) to down 0.4%.
Foodservice & Drinking Place sales were up 1.1% in August and increased 10.9% over August 2021. From Jan. to Aug. 2022 restaurant and bar sales were up 18.5% compared to the same period in 2021. While it was only one month but it was a decent August for restaurants.
Economic News This Week
- Inflation continued to bedevil the U.S. economy in August. At first glance, it may appear that inflation is under control with the August from July Consumer Price Index for all items up a modest 0.1%. This shows the problem with looking at just one number from a large study. Pulling down the All Items Index was the price of gasoline, which fell a steep 11.0. The so-called “Core Index,” which excludes the volatile food and energy prices indexes, rose 0.6% from July to August. Other categories that had significant price increases for August include Electricity up 3.5%, Medical Commodities up 0.6% and Medical Care Services up 0.8%. For the 12 months ending in August, the CPI for all items is up 8.3%. (For price data on food in August, please see the Foodservice News This Week section below.)
- Initial jobless claims fell by 5,000 to 213,000 for the week ending Sept. 10 from the previous week. The 4-week moving average decreased by 8,000 claims to 224,000. Initial jobless claims continue to slide slower, indicating that employers are holding on to their current workers even if their business is soft.
- Industrial production decreased 0.2% in August. Manufacturing output was up 0.1% while the index for mining was unchanged and the utilities index fell 2.3%. Capacity Utilization grew by 0.2% in August to 80.0%, a rate that is 0.4 percentage points above its long-run (1972-2021) average.
- Researchers now calculate that health-related Issues caused by COVID-19 led approximately 500,000 workers to leave the workforce. The more recent data ranged from 340,000 to 590,000 and scientists believe that the 500,000 figure is realistic. Some earlier estimates ran as high as a million people leaving the workforce due to COVID-19.
Foodservice News This Week
- The Bureau of Labor Statistics reported that the August Consumer Price Index showed that food prices rose 0.8% from July and are up 11.4% in the 12-month period ending in August. Food at Home prices increased 0.7% in August from July and have risen 13.5% in the 12 months from August last year to August this year. Food Away from Home Prices rose 0.9% in August from July and up 8.0% from August last year.
- Starbucks says the company is not reinventing what it does, just the way the company does it. The major changes are built around vastly improved equipment. For example, a new system to make Mocha Frappuccino cuts the time from 86 seconds to 35 seconds. Cold brew coffee, now a $1.2 billion business for Starbucks, now takes 20 hours and 20 different steps. The new process automatically grinds and presses the coffee beans and reduces waste by 15%. And instead of having the baristas batch-brew hot coffee every half hour, the company will have a machine that grinds and brews a single cup in 30 seconds. And the company will invest $1 billion in labor, including increased wages.
- Burger King has announced an investment of $400 million to renovate stores and increase advertising over the next two years. BK has already begun making changes by slimming its menu to speed up drive-thru times and reduce the number of paper coupons to encourage customers to use its mobile app. Burger King says that historically remodeled stores improve average sales by 12% in their first year and outperform older stores over time. The remodels should begin hitting the market in mid-2023. Details of the redesign were not provided. The chain will also increase their U.S. advertising budget by 30% over the next 2 years with the expectation that this will impact sales in the next quarter. One report said all this activity was a reaction to the belief at Burger King that they were being outperformed by McDonald’s and other competitors.
- Sports & Social has made a major effort to provide customers with an “immersive experience” and soon will raise the bar by introducing Sports & Social DraftKings. The 10,400-square-foot specialized store will offer a 32-foot media wall, live music, arcade games, a full bar and menu and fantasy sports as well as allow customers to place bets from their mobile devices. It is located in Troy, Mich.
- Research indicates that consumers are returning to dining out. There were predictions that the COVID-19 pandemic permanently changed dining habits in favor of takeout and delivery at the expense of eating at restaurants. However, a study by MaruMatchbox found that 44% are eating on-premises at least once a week or more and 78% are dining on-site at least once a month. For comparison, 27% are ordering takeout/delivery online once a week or more.
- Growth Chains: Starbucks will add roughly 2,000 stores in the U.S. in the next 3 years. Just 2% of the additional stores will be the traditional cafes with drive-thru units being in the majority and pickup and delivery stores making up the rest. Starbucks also plans to add 3,000 more locations in China. Twin Peaks Restaurants has opened 5 locations in the past quarter and has restaurants scheduled to open in Arizona, Indiana, Tennessee and Texas as well as 3 restaurants in Mexico before the end of the year. In addition, the chain has also announced they have signed an agreement for 8 franchised restaurants in North Carolina and another deal for 4 units in Louisville. TGI Friday’s has signed what the company terms the largest franchise deal in their history that calls for 75 restaurants in South Asia and SE Asia. Pizzeria Bianco will open their first location outside of its home state of Arizona when its new restaurant opens in Los Angeles.
The latest comparable store sales for publicly held restaurant chains can be found by clicking here for the most recent Green Sheet