Where Do We Eat?Written by Dennis Sun
Published: 10 December 2016
The election is over, and we have a new President Trump. Some are happy and staying, some are disappointed and leaving, but most are just glad it is over. The sun will still rise tomorrow morning, and life will go on. It’s what we have always done after an election. America is known for two things, long presidential elections and having no shots fired during the transfer of power. The relinquishment of power and the handing over the reins of leadership to a new person has always been calm and orderly, something that doesn’t always happen in a lot of countries.
And so life does go on, and being involved, as a number of you are, in raising and providing food for our nation and some other countries, I always get nervous when I hear talk about a recession coming, especially in the food or restaurant business.
Some analysts say the restaurant recession has arrived, and if it is true, that could be tough on places like Casper, where we seem to have a number of restaurants and plans for three or four more in the downtown area. We all like to have a choice of restaurants, and we hope the new ones, along with the established ones, all make a go of it.
Consumers are starting to grapple with rising costs, maybe not so much in Wyoming as in other states, and they are learning, with grocery prices coming down, that we need to take advantage of cheaper groceries and eat more at home. We certainly hope people are buying beef and lamb, especially beef. Beef producers are really hurting, as some say we have to eat our way out of the beef glut. There are a number of other reasons for the low beef prices, but large numbers of cattle is one of them.
A number of major investment companies have lowered their expectations for large restaurant companies. Stifel, which downgraded 11 restaurant stocks to sell last July, last week warned of the saturated and mature nature of the U.S. restaurant industry.
Along with other rising costs of living, there is also a rising cost of eating out, which has come just as grocery prices have gotten cheaper. The cost of food purchased for home use across America has fallen over 2.4 percent in the past year. As MarketWatch said, that is the biggest decline over a 12-month period since the end of the 2009 recession. Food at home has lowered about as much as food from restaurants has risen.
Hamburger, the biggest beef product, is down 8.8 percent from a year ago, despite a rare 0.8 percent rise in October. That, along with other lower meat prices, should help those in the restaurant business. Also, those in the restaurant business use a lot of imagination to lure us in to eat at their business. We just need to take advantage of those marketing ploys.
Restaurant operators are expected to increase the use of promotions and discounts to win back diners, further crimping earnings at a time when commodity costs are historically low. Commodity deflation has already created greater competition from our supermarkets, which are better able to pass higher costs on to the consumers.
So, just like in the livestock business, it is supply and demand. We know that all too well.