The inflationary game: Out-of-home versus in-home consumption

I find the US very interesting when it comes to the latest trends and consumer behavior within fast-moving consumer goods, especially within in-home and out-of-home consumption:

I recently published an article in Norway about the latest trends, with consumers trading down when it comes to in-home consumption. In the US grocery prices increased by 13.5% year on year in August, higher than the increase in restaurant prices of 8%, according to the Labor Department. So in addition to the trading down in the grocery sector, some consumers have switched to out-of-home consumption, and then to cheap fast food consumption due to the relative differences in price adjustments. Even though there is wage inflation everywhere in the US, the minimum wage per hour in the US is still unchanged since 2009 at 7.25 dollars an hour, and many workers in the fast food chains are at minimum wage levels. Furthermore, fast food chains have automized parts of their ordering processes, taking down costs, and creating a price advantage relatively, to the grocery chains. The grocery chains have also created an automated process in the cashier areas, but not with the same scale and speed. We see this trend in Europe and Scandinavia as well.

Furthermore, to mitigate the inflationary environment, the fast food chains like McDonald´s, Burger King and Domino´s are taking several actions of course also around price: McDonald´s increased their prices in the second quarter in the "high single digits" according to the company report and Domino´s also increased their best deal of 6.99 by a dollar. But more things are happening, for example, players are also reducing deal sizes. For example at Burger King, the number of chicken nuggets has been reduced from 10 pieces to 8 pieces, to get to the right price points for the consumer.

We will probably see more of this in Europe, it´s happening already, both in the UK and Eastern Europe for example, but so far in Scandinavia, we have seen less of this trend, but most likely we will see a similar development, and the companies need to be ready for this shift, both for in-home and out-of-home consumption and without losing brand preference and reputation. The fastest and most innovative players with a lean focus will clearly have an advantage here. The inflationary trend will create price actions, but also much more than that in the next wave we have in front of us.

Get ready for the next wave, both suppliers and retailers!