Restaurant prices have risen by 4%. How Costco, Kroger and others are reacting

Clam shell or plastic? US consumers may complain about rising food prices, but when it comes to dinner, many prefer to spend more at a restaurant than at the supermarket.

And we’re talking about a significant number of clams here, too. U.S. Consumer Price Index (CPI) numbers show that overall food prices rose 2.2% from June 2023 to June 2024. However, food prices at restaurants rose much more than food prices at grocery stores and supermarkets. Here’s the breakdown from the U.S. Department of Agriculture:

• The Consumer Price Index (CPI) for food sold in restaurants and away from home increased by 4.1% from June 2023 to June 2024.
• Food prices in grocery stores and supermarkets rose by 1.1 percent during the same period.
• The U.S. Department of Agriculture (USDA) expects overall food prices to rise by two percent in 2025. Prices in restaurants will rise by three percent, and for food at home by 0.7 percent.

Why are consumers, many of whom complain about high food prices, willing to spend more money on restaurant dining?

Extremely practical and food without the mess factor

Two main factors are driving demand for restaurant orders: convenience and habit. Leisure and relaxation are difficult to put a price on, but they are apparently more expensive than cooking and washing dishes.

Take food ordering apps, for example, which have seen a surge in popularity during the pandemic. Back in 2019, 41% of consumers said they had recently ordered from a restaurant website or app like Grubhub, DoorDash or Uber Eats, according to a study by Zion & Zion. By April 2020, right after the pandemic lockdown, revenue for major food delivery services increased by 162%, Bloomberg reports.

Despite this hard-to-beat figure and the fees included in app orders, revenue continues to grow. In March 2024, revenue increased by 8% compared to March 2023.

Grocers are willing to take advantage of the price differences, If They can convince their customers that prepared meals or take-out foods are just as convenient and delicious as restaurant food. Since the pandemic, that’s become a harder sell. While slightly more customers are buying prepared meals in grocery stores now than two years ago, according to Technomics’ 2023 Retail Foodservice Consumer Trend Report (in Supermarket News), those purchases are still below pre-pandemic levels.

Tips for the “Reheat and Serve” category for supermarkets

Perhaps that third ingredient can spice things up for retailers: value. When deciding to buy a prepared meal in a store, 59% of all consumers cite price as important, up from 52% in 2021, Supermarket News reports. (For comparison, frequent prepared meal shoppers spend just over $11 per meal.)

These seven strategies and examples show how food vendors can prevail over restaurants when everyone is gathered around the table.

1. Make “less work” part of the value. Nine out of ten buyers who already buy prepared meals at the store, believing it’s a good value, the Technomic study found; 39% buy the meals because they lack cooking skills. Retailers can attract new shoppers by touting the simplicity and value of their prepared meals, including through signs and food packaging. In March, Kroger introduced a line of “affordable and easy-to-prepare” heat-and-eat seafood meals under several of its private label brands. Clever wording, because fish deters some cooks, and studies show that consumers who buy seafood when grocery shopping spend twice as much on average as those who don’t, Grocery Dive reported.
2. Promote quality better. Supermarkets and other food retailers are becoming more and more concerned with the quality of prepared meals. 74% of shoppers say quality has improved “significantly” over the past two years, according to Supermarket News. But quality is perceived by consumers in many different ways. Half of shoppers reach for a prepared meal because it looks appetizing, but 69% want to see more healthy options. Take Trader Joe’s, for example. The company approaches the quality of prepared meals with a lot of intrigue, regularly offering creative dishes with unexpected ingredient combinations, such as kung pao Brussels sprouts and sweet corn, burrata and basil ravioli.
3. Display the category in a high traffic area. Nearly 30% of consumers told Technomic that the location of prepared foods influences their purchase decision, likely because they don’t think of “prepared foods” or find them on shopping lists. So retailers need to give them an idea by putting the options box in the middle of high-demand areas of the store. Whole Foods does this and more by giving its prepared foods category enough space to offer regularly rotating hot and cold self-serve and counter meals that are hard to resist, like spicy stuffed grape leaves, sesame noodles, paleo-friendly salmon and teriyaki chicken skewers.
4. Consider skipping breakfast. More and more consumers commuting back to work after the pandemic are now buying their pre-made breakfast at a grocery store, gas station or fast-food restaurant instead of the supermarket. Or they’re simply cracking an egg at home. This simplicity will be hard to beat, so grocers may choose to forego this prepared meal option and focus on others. The other option: Make their breakfast so irresistible that you offer half-price coffee or valuable coupons to customers who buy a prepared breakfast. Chances are, once in the store, these shoppers will grab yet another product (and redeem the coupon).
5. Learn to pass the Generation Z smell test. Restaurant delivery users tend to be younger than 30 and have lower incomes. Nearly half of those earning less than $25,000 a year use the apps, a study by Zion & Zion found. Not surprisingly, young consumers are also buying fewer prepared foods in-store, according to Technomic. Many supermarkets sell prepared versions of popular menu items from restaurants and fast-food chains, including Panera, Rao’s, PF Chang’s, TGI Friday’s and even White Castle. Retailers can use their loyalty program data to directly promote these products to young consumers at key times and days of the week.
6. Set the table with ready meals for new scenarios. Why only market ready meals for weekday dinners? Retailers can offer seasonal warm-up and dinner meals and prefabricated Supermarket meals for holidays, kids’ birthdays and even disasters. Big-box club Costco is promoting the Readywise Emergency Food Bucket, with 150 freeze-dried servings of pasta Alfredo, potato pie, soups and other meals that last for 25 years, online for $79.99 (a savings of $20). In early August, Walmart offered a similar Readywise-branded bucket, but with 120 meals, for $179.99, and Amazon offered the 120-meal bucket for $125, with prices fluctuating.
7. Convince your customers of the safety of your food. Most people may not think about food safety when purchasing a prepared meal at the supermarket until something like the recent listeria outbreak linked to Boar’s Head deli meats happens. In-house dietitians, like those featured online at Publix, can provide guidance on the freshness and nutrition of prepared meals and train store employees to answer questions about freshness and preparation.

Keep it competitive while it’s hot!

Collapsible or plastic packaging? Supermarkets and grocery stores have the means to influence the answer, but they should act quickly. Fast food chains McDonald’s and Burger King are cutting their prices for a limited time this summer, CNBC reports.

Until these offers end, customers could continue their drive-thru stops as part of a new routine, just as app-based delivery services have already become routine.

Eating at home is simply a routine that needs to be changed, and prices have never been so affordable. Retailers, don’t miss this opportunity.