Restaurant spending decline first in 60 years

by L. Joshua Sosland
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Total consumer expend-itures at restaurants in 2009 declined 2.2% from the year before, the first year-to-year decline since 1949, according to data published in June by the Economic Research Service of the U.S. Department of Agriculture.

Expenditures at “eating and drinking places” totaled $411,777 million, down from a record $421,175 million in 2008. The 2.2% decline compared with increases of 2.9% in 2008 and 5.6% in 2007. In the four years before 2007, annual restaurant expenditures climbed between 6.1% and 7% each year.

The decline of 2.2% was the first decline of any amount since restaurant sales fell 0.7% in 1949 and the largest drop since a 4.1% downturn in 1938, at the height of the Great Depression.

The data showing a downturn were consistent with trends highlighted by other industry observers. The National Restaurant Association, which tracks industry performance through its Restaurant Performance Index (R.P.I.), has seen the index fall and stay below 100 for approximately two years. The R.P.I. is based on the responses to the N.R.A.’s Restaurant Industry Tracking Survey, which is fielded monthly among restaurant operators nationwide on a variety of indicators including sales, traffic, labor and capital expenditures. In March, the R.P.I. rose above 100 for the first time in two years.

In addition to eating and drinking places, a number of other categories are included in total food away-from-home expenditures, but most of these experienced increases in 2009.

For instance, spending at schools and colleges in 2009 was $34,209 million, up 3.2% from 2008.

At recreational places, a category that covers a range of venues, including sports arenas, bowling alleys, amusement parks and clubs at golf courses, food spending in 2009 was $20,025 million, up 2%.

Up sharply in 2009 was spending at retail stores, direct selling, at $30,816 million, up 29% from $23,803 million the year before. The category includes restaurant kiosk sales at food retailers.

Queried about the jump, Annette Clauson, an E.R.S. agricultural economist, said rapid growth from certain channels drove the growth.

“There were specific store increases that led to the 2009 change,” she said. “The stores that increased the most in this category were the food stores attached to gas stations; warehouse/wholesale clubs, and drug stores. These stores are in this category if food is less than 50% of their sales. I have read in several food marketing releases that stores such as Target are replacing their garden shop with food. Also, food sales increased in 2009 for all of the food stores/quick marts attached to gas stations.”

Food expenditures at hotels and motels in 2009 were $30,077 million, down 0.3% from the year before. It was the second consecutive year of a 0.3% decline. Before 2008, food expenditures at hotels and motels had been up every year since 1991. Before that, 1954 was the last year in which hotel/motel food spending declined.

Overall, total away-from-home food expenditures in 2009 were $574,541 million, down 0.1% from 2008.

Eating and drinking places represented the largest segment of the away-from-home food expenditures category, accounting for 71.7% of all such expenditures. The share is down from 73.2% in 2008 and 73% in 2007. The figure has held within a tight range since the mid-1990s.

From the 1930s until the mid-1990s, the “other” category for away-from-home food expenditures was in a steady decline, from 43.7% in 1945 to 9.3% in 1995. Included in the other category are military exchanges and clubs, railroad dining cars, airlines, food service in manufacturing plants, institutions, hospitals, boarding houses, fraternities and sororities, and civic and social organizations; and food supplied to military forces, civilian employees and child day care centers.

Food store sales flat in ’09

While food-at-home sales rose in 2009, growth was not from traditional food stores

Food store sales in 2009 totaled $397,389 million, virtually unchanged from $397,403 million in 2008, according to data issued in June by the Economic Research Service of the U.S. Department of Agriculture. Total food-at-home sales last year were $607,422 million, up 1.8% from 2008.

The lack of growth in food stores in 2009 marked a very different outcome for these channels than in the previous several years. Food stores enjoyed sales growth of 5.3% in 2008, 4.9% in 2007 and growth of between 3.2% and 4% each year from 2002 through 2006, when compared with the prior year.

Driving the overall growth in food at home expenditures were sales at other stores.

According to the E.R.S., food stores, which include supermarkets and specialty food stores, include retailers “primarily engaged in retailing a general line of food products.” Other stores, which include club/warehouse stores, convenience stores, drug stores and gas stations, include retailers selling “a wide range of the new products with no one merchandise line predominating.”

At $176,402 million, other stores saw 6.8% growth in 2009. The jump followed a decline of 1.3% in 2008 and a gain of 4.3% in 2007. While more erratic than year-to-year changes in food store sales, other stores steadily have been gaining share of consumer spending on food at home. The category has enjoyed four years with double-digit sales growth in the past 10 years. By contrast, food stores have not seen sales growth exceed 10% since 1980.

With the 2009 gain, the share of all at-home food sales accounted for by other stores hit 29%, up from 27.7% in 2008 and equal to the record of 29% in 2006. As recently as 1990, other stores accounted for only 10.6% of at-home food expenditures. Over this same period, food stores share of food expenditures fell from 84% to only 65% in 2009. The peak for food stores in terms of share of at-home food expenditures was 1982 at 87%.

Home delivery and mail order shipments of food in 2009 totaled $19,946 million, down 5% from 2008. Home delivery has experienced essentially no real growth over the past 10 years with sales up 6% from 1999. By contrast, food store sales were up 33% since 1999 and other stores jumped a whopping 113%. Delivery and mail order shipments of foods grew rapidly in the 1990s, with 1999 sales up 309% from 1989. By contrast, food store sales were up 26% over that 10-year period and other stores were up 195%.

The E.R.S. defines the delivery and mail order segment as focused on businesses that sell merchandise “using non-store means, such as catalogues, toll-free telephone numbers, or electronic media, such as interactive television or computer.”

Food takes slightly larger share of income

With disposable income barely growing in 2009, food share edges higher

U.S. food expenditures in 2009, totaling $1,034.6 billion, equated to 9.5% of disposable income. Spending last year was up 0.6% from $1.017.5 billion in 2008 when food spending was 9.4% of income.

Data on food expenditures were issued last month by the Economic Research Service of the U.S. Department of Agriculture.

Since 1950, food spending as a percentage of disposable income has risen only in 11 of 60 years. During this period, the share of income spent on food declined from 20.6% in 1950, to 13.2% in 1980 to 9.5% in 2009. The share first fell below 10% in 2000, at 9.9%, and has ranged between 9.4% and 9.9% in each of the intervening years.

One of the reasons families spent more on food in 2009 was the tepid pace of economic growth. U.S. disposable personal income in 2009, at $10,923.6 billion, was up 1.1% from $10,806.4 billion in 2008. The 1.1% growth rate compared with 3.9% in 2008 and 7.9% in 2007. It was the slowest annual growth rate for disposable income since a 0.1% decline in 1949.

Spending on food at home in 2009 was $605.4 billion, up 1.8% from $594.9 billion in 2008. Americans spent 5.5% of disposable income on food at home in 2009, the same proportion as in 2008 and 2007. Spending on food away from home was $429.2 billion in 2008, up 1.6% from $422.6 billion in 2007. The proportion of income spent on food away from home was 3.9% in 2009, the same as in 2008 and 2007.

Overall spending on food in the United States remained solidly below levels spent in other countries, based on the most recent E.R.S. data.

Through 2008, the United States was spending 5.7% of personal income (a different measure than personal income) on food at home, significantly beneath the 8.2% in Ireland and 8.3% in

Singapore, countries that ranked second and third, respectively.

Food spending in other large economies around the world include 8.6% in the United Kingdom, 11.4% in Germany, 14.6% in Japan and 34.9% in China.

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