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How is the cost of living crisis impacting restaurants?

As inflation rates continue to rise, the last six months has been particularly tough for restaurants, who are suffering even higher levels than the general economy.

Marcus Kinsey Director 08/07/2023
60% of customers have cut back their spending on eating out.

With such high prices it’s no surprise that we are seeing customers cutting back on eating out, with our own Grocery Eye data indicating that 60% of customers have cut back their spending on eating out.

However, this price impact is not affecting all restaurant brands in the same way. Using BrandVue data we are able to understand the impact of price rises on a range of brands.  With our ‘Bill Shock’ measure, we can see which restaurants are causing surprise with their higher prices, and which ones are not.

Shifting value perceptions

What we have seen is that high end restaurants, where customers are used to paying a premium, has actually seen declines in customers getting a shock when the time comes to get their wallets out. As costs rise, the premium price tag seems more acceptable.

The reverse is true at the lower value end. Where customers were expecting to get value, they are now getting a big dose of ‘bill shock’.

After observing these changes, we thought it would be interesting to see what this change has had to the impressions of brands who are suffering from increased ‘bill shock’.

 

Impact on brand advocacy

Investigating how this has impacted the brand, we looked at brands that had seen the biggest increase in their ‘bill shocks’ scores and how this impacted their brand image.

For brands who position themselves as offering value-for-money, we see that on average they have dropped by 2%. So, there is a weakening of brand perception, but not a strong one.

This decline is unlikely to have been picked up in brand tracking, but the trend is clear.

With ‘bill shock’ continuing to be felt, there is a danger that this brand perception continues to weaken over time. There also appears to be a lag from experiencing ‘bill shock’ to declines in positive brand imagery.

This lag shows that ‘bill shock’ is a leading indicator, and that it may take a few instances to feed through to wider measures.

Impact on behaviour

Behavioural measures have also started to decline alongside ‘bill shock’.

Consideration has dropped by 3.2% over the last 18 months, indicating that higher prices are impacting where people dine out. However, this hasn’t impacted frequency of visits yet, which remains stable.

How long will this be the case?

In summary

Considering the impact of inflation, and how it’s being felt (even at the value-end of the eating out market), getting your products and prices right is going to be critical going forward.

  • Is your brand set up to deal with these constant changes?

At Savanta we can help you understand how changes are impacting your brand through our BrandVue product. We also have a full suite of innovation methodologies, from helping generating ideas, to testing concepts, products and in-market performance we can support you along that journey. Our pricing methodologies mean you can understand optimal prices and optimisation of menus.

To learn more about how we could help you develop products contact: [email protected]

Related reading

If you enjoyed reading this, check out our latest Grocery Eye report, which uncovers how inflation and the cost-of-living crisis has impacted consumers’ attitudes and behaviours towards healthy eating.

Grocery Eye - download

Click here to read more and access the full report.

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