Coffee and tea concepts perk up as commuters return to the office. How much are consumers willing to pay for a QSR meal? Plus, The Conference Board takes a look at the 2024 economic environment. Those stories and more this week in foodservice.
Apparently, workers returning to the office find themselves in need of a little pick-me-up. In September, for example, gourmet coffee and tea quick-service restaurants saw a 4% increase in consumer traffic, per data from market research firm Circana, formerly IRI and The NPD Group. In addition, donut quick-service restaurants saw a 3% traffic increase in September 2023, compared to the same month in 2022.
The rise in popularity of these specialty items is not only reflected in traffic and servings but also in the expansion of quick-service restaurants selling these gourmet offerings. For example, gourmet coffee and tea shops saw a surge of 3,500 new locations in March 2023 compared to March 2022.
“We’re seeing a notable increase in interest in these specialty items as consumers opt for on-the-go beverages and snacks while rediscovering their morning routines,” said David Portalatin, senior vice president and industry advisor, Food and Foodservice, Circana. “With a rising number of employees returning to the office post-pandemic and the transition to the fall season, gourmet coffee, tea, and donuts offer a small sense of indulgence and convenience for busy consumers.”
Consumers’ appetite for customization and different taste experiences shows no signs of abating. The specialty coffee segment, which consists of various flavors and lattes, saw a 4% rise in popularity in September compared to the same month last year, per Circana. Further, 47% of all gourmet coffee, tea, and donut consumers purchased pumpkin-flavored coffee in September, highlighting the important role seasonal, limited-time offers can play in driving business. Servings of energy drinks at quick-service coffee and tea restaurants were up an impressive 55% over the past three months ending in September, compared to the same time period last year.
Foodservice News This Week
- Consumers crave the convenience of quick-service restaurants but is there a ceiling in terms of how much they are willing to pay? We may soon find out. Fast-food prices are up 29% compared to October 2019, per a Restaurant Business story. That means a fast-food meal that cost $30 four years ago now costs $38 and that does not include a tip, which has become more prominent. Over the past year, fast-food prices have shot up 6.2%, which is more than full-service, which saw prices increase 4.3%. Both are growing faster than the rate of inflation.
- Consumers seem to have insatiable appetites for trying new cuisines and experiential dining. Case in point: data from Placer.ai shows customer visits to GEN Korean BBQ increased 17.7% in the third quarter of 2023 compared to the same time frame in 2022. Compared to 2019, visits are up an impressive 41.6%. As the name implies, the chain offers a Korean barbecue-inspired menu that guests prepare for themselves.
- Atlanta-based chain Rreal Tacos added to its portfolio by acquiring Zocalo. Also based in Atlanta, Zocalo serves a Mexican menu from a location that previously served as a gas station. Zócalo is led by chef Lucero Martinez-Obregon and brothers Marco and Luis Martinez. Damian Otero and Miguel Hernandez own Rreal Tacos, which has five units.
- Congratulations to Middleby Corp.’s Danielle Mason on receiving the SHFM Foundation Dick Cattani Fellowship Award. The award honors industry icon Dick Cattani and recognizes an SHFM member who has made significant contributions to the success of the Foundation and the industry.
- New Age Industrial Corp. was accepted into the Kansas Department of Commerce’s Made in Kansas program. The Made in Kansas program showcases products made in the state and provides participating companies with a verified stamp of assurance for use in promotional activities. New Age Industrial, which manufactures aluminum products, was among the first 13 companies accepted into this program.
- Growth Chains: Effin-Egg opened its second location which emphasizes digital orders. The Florida-based breakfast sandwich concept’s Athens, Ga., location has limited indoor seating and several pickup areas for customers who order via one of the chain’s multiple digital channels. Fogo de Chão is preparing to enter the Nashville, Tenn., market. The Brazilian steakhouse chain will open an 8,500-square-foot restaurant in Nashville Yards in 2025. Potbelly plans to expand its presence in the greater Seattle-Tacoma region of Washington state. Pokeworks plans to open four Canadian locations across the following markets: Toronto (two units), Burlington and Barrhaven. The chain expects all four locations to be operational by March of 2024. Potbelly plans to transfer ownership of 9 existing restaurants to franchisee Sound Sandwich LLC who will then develop another 13 units over the next 8 years. Ziggi’s Coffee has inked development agreements that could lead to the chain opening 50 units in the Atlanta market.
Economic News This Week
- The Conference Board Leading Economic Index declined 0.8% in October 2023. This follows a 0.7% September decline. For the six-month period between April and October 2023, the LEI contracted 3.3%. The good news? This is 1.2% less than the contraction that occurred over the previous six months. “After a pause in September, the LEI resumed signaling a recession in the near term,” per a Conference Board spokesperson. “The Conference Board expects elevated inflation, high-interest rates and contracting consumer spending – due to the depleting pandemic savings and mandatory student loan repayments – to tip the U.S. economy into a very short recession. We forecast that real GDP will expand by just 0.8% in 2024.”
- The Producer Price Index for final demand fell 0.5% in October, the U.S. Bureau of Labor Statistics reported. This comes after a 0.4% increase in September. The October decline is the largest decrease in final demand prices since a 1.2% drop in April 2020 and eases some concern about the U.S. economy entering a recession, per a CBS report. In October, the index for final demand goods fell 1.4%. Prices for final demand services were unchanged. The index for final demand fewer foods, energy, and trade services advanced 0.1% in October, the fifth consecutive rise. For the 12 months that ended in October, prices for final demand less foods, energy, and trade services moved up 2.9%.
- S. retail sales declined 0.1% in October compared to the previous month, per the U.S. Census Bureau. October’s results represent a 2.5% increase compared to the same month in 2022. Total sales for the August 2023 through October 2023 period increased 3.1% from the same period a year ago. The August 2023 to September 2023 percent change was revised from up 0.7% to up 0.9%. Eating and drinking places registered total sales of $92.9 billion on a seasonally adjusted basis in October, according to preliminary data from the U.S. Census Bureau. That was up 0.3% from September’s upward-revised volume of $92.6 and represented the eighth consecutive month of sales gains. In total during the last 8 months, eating and drinking place sales increased 6.4% on a seasonally adjusted basis, per data from the National Restaurant Association. In comparison, total sales in non-restaurant retail sectors were up just 1.9% during the same 8-month period.
- Industrial production declined 0.6% in October, according to data from the U.S. Federal Reserve. Manufacturing output fell 0.7% and the Fed attributes much of this decline due to a 10% drop in the output of motor vehicles and parts that was affected by strikes at several major manufacturers of motor vehicles. The index for manufacturing excluding motor vehicles and parts edged up 0.1%. The index for utilities decreased 1.6%. Total industrial production in October was 0.7% less than its year-earlier level. Capacity utilization moved down 0.6% for a reading of 78.9% in October, a rate that is 0.8% less than its long-run (1972–2022) average.
- Initial jobless claims increased by 13,000 during the week ending November 11, 2023, per data from the U.S. Department of Labor. Checking in at 231,000, this represents the highest number of claims in three months, per Yahoo! Finance. The 231,000 claims were 11,000 greater than most economists' projections, per various published reports. The 4-week moving average was 220,250, an increase of 7,750 from the previous week. The advance number for seasonally adjusted insured unemployment during the week ending November 4 was 1.87 million, which is the highest level for insured unemployment since November 27, 2021, when it was 1.96 million, per the USDL.
- October building permits for privately owned housing units came in at 1.1% greater than the previous month, per data from the U.S. Census Bureau and the U.S. Department of Housing and Urban Development. This is 4.4% less than October 2022, which shows the continued impact of higher interest rates. Single-family permits grew by 0.5% in October compared to the previous month. October privately owned housing starts came in at 4.2% greater than the previous month. Single-family housing starts were 0.2% greater than in September.