CHICAGO -- In a recently completed survey of consumers, Chicago-based foodservice consultants Technomic Inc. found that the financial market meltdown is likely to cause a high number (74%) of consumers to visit both quick-service and full-service restaurants less often. Technomic also found that more than 50% of consumers, and more than 70% of higher-income consumers, plan to spend less when they do visit either type of restaurant.
"Our research indicates that consumers are deeply concerned about the loss in value of their home equity, stock portfolio and retirement investments and their [image-nocss] credit card debt. As a result, they indicate clear intentions to reduce spending in a variety of ways," said Bob Goldin, Technomic executive vice president. "Restaurants will most certainly feel the effects of the pullback."
Technomic provides clients with the facts, insights and consulting support they need to enhance their business strategies, decisions and results. Its services include numerous publications and digital products, as well as proprietary studies and ongoing research on all aspects of the food industry.
Meanwhile, a study released earlier this month by Booz & Co. said U.S. consumers have cut back spending significantly over the past six months. More than one-third of consumers have made substantial cutbacks in frequent purchases, such as dining out, driving and shopping for everyday goods. In addition consumers plan to continue tightening their household budgets even further if the economy worsens, cutting back on a range of products and services and durable goods, from electronics purchases to gym memberships to children's toys.
"Increasingly, consumers are spending less and stretching their dollars further. And counter to some beliefs—these changes are being made broadly across income segments as most households are impacted by either real estate and equity values, ability to access credit, job security and rising input prices" said Paul Leinwand, Booz & Co. partner, who noted that 47% of those polled have seen their savings decrease over the six-month period studied, while 41% have seen their levels of debt increase. "Consumers are learning new spending behaviors, and in some cases these more prudent choices will become long-term habits."
Households have cut back first on a set of frequent expenditures that are relatively easy to alter—out-of-home events, shopping and driving—even though they highly value many of these activities.
Consumers are reducing away-from-home spending, primarily by changing their dining habits. Of those polled, 43% of respondents are eating out less, 39% are choosing less expensive restaurants and 35% are packing their own lunch for work, compared to six months ago.
People are shopping less and changing where they shop. Among other findings, the study said rising fuel prices have led more than a third of consumers surveyed to reduce the amount they drive. Of those polled, 35% now shop closer to home, and 33% have cut down on non-work driving. Reduced driving time is also related to the changes in shopping behavior.
But despite concerns over high gasoline prices, most consumers have not moved to find alternate transportation. Only 8.3% more consumers are taking public transportation than six months ago, and only 7.3% more are carpooling to work.
When the economy improves, consumers will increase their discretionary spending, beginning with dining out, vacations and non-work driving. The action that most consumers would bring back is eating out (28%), followed by taking vacations (14%) and resuming non-work driving (14%). More than 10% would also stop trading down on restaurant choices.
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And in a survey conducted in mid-October by Clear Seas Research, food industry insiders expressed concern over the impact of the current credit crisis—both on their companies and on the food and beverage industry as a whole. While some believe the credit crisis will have "very little" or "no impact," most (74%) anticipate "moderate" to "great impact" on their company's business or operations.
On a macro-level, most (82%) believe that the current economy will have a "direct impact on the overall food and beverage industry." At the individual company level, insiders expressed concern with liquidity (daily working capital) and their company's ability to make purchases; a majority (73%) anticipate increased/further industry consolidation in response to current economic times.Insiders expect the "foodservice" segment to be most negatively impacted by current economic conditions, while "meat/poultry/seafood" and "retail" are also expected to struggle.
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