KANSAS CITY — Over the past four years, the foodservice industry has been buffeted by a series of challenges creating at times severe difficultieJosh Sosland, editor of Milling & Baking News.
Source: Sosland Publishing Co. s for operators. The repeated body blows sustained by the sector may raise questions about whether the longstanding slow but steady growth in dollar share enjoyed by eating-out establishments had finally peaked. Data tracked by the US Department of Agriculture’s Economic Research Service (ERS) answers the question with a resounding “no.”

For decades, few food industry trends have been more consistent or powerful than the growing share of food dollars captured by the foodservice industry. ERS data show 19% of food dollars were spent away from home in the mid-1930s, a figure that rose in the 1940s to the mid-20% range and generally held there until the early 1960s, when a 60-year period of steady increases, decade by decade, started. By 2019, the share of food purchased away from home stood just over 56%.

The foodservice sector’s recent woes began, of course, in March 2020, when restaurants largely closed during the initial months of the pandemic and recovered only partially during the extended period when social distancing was widely practiced. During the great resignation, as the United States emerged from the pandemic, few economic sectors struggled more visibly to retain workers than restaurants. Now consumers are pushing back against higher menu prices, instituted in response to rising costs of inputs, including ingredients and labor.

The cumulative effects of these forces continue to take a toll. Last month, Red Lobster filed for bankruptcy protection. The casual restaurant chain, which had grown rapidly in the 1980s under General Mills, Inc.’s ownership before it was spun off in 1995, appears poised to be taken over by creditors. The bankruptcy was the latest of a string of companies filing since the pandemic, including such established names as Sizzler steakhouses, Chuck E. Cheese and California Pizza Kitchen, as well as NPC International, which owned 1,200 Pizza Hut and 385 Wendy’s franchised locations.

Meanwhile, quick-service restaurants have grappled with how to respond to consumer resistance to higher prices. Restaurant industry executives have begun reintroducing value menus to attract customers, weighing such actions against the need to maintain prices at levels adequate to offset the effects of continuing cost inflation.

Recent data issued by the National Restaurant Association add to questions about consumer eating patterns. Same-store sales were reported lower by restaurant operators in April 2024, marking the fourth straight month of decrease. By contrast, in five of the last seven months of 2023, restaurant operators said traffic was increasing.

Notwithstanding the challenges the foodservice industry has faced, away-from-home eating in aggregate has recovered from the pandemic forcefully. After slumping 12% in 2020, spending away from home jumped 25% in 2021, 15% in 2022 and 13% in 2023. By contrast, at-home spending last year eked out only a 2% gain. The ERS data showed away-from-home eating, which includes channels such as restaurants, bars, hotels, schools and recreational places, accounted for 58% of all food expenditures last year, an all-time high. The figure was up from 56.1% in 2022 and a dip of 51.2% in 2020.

Analysis by Bloomberg shows one of the sources of foodservice strength — continued growth in meal deliveries, long after the 2020 pandemic surge that included a 62% jump in April 2020 from the month before. While far slower than the rate of expansion at the height of the pandemic, Bloomberg data indicate sales by major delivery services expanded at a healthy 8% rate year-over-year in March 2024. The sector is led by DoorDash, which accounts for about two-thirds of US consumer meal delivery sales, followed by Uber Eats, accounting for about a quarter of the market.

Numerous commercial baking companies over the past several decades have prospered by dedicating their businesses to meeting the needs of foodservice customers. In spite of the serious disruptions experienced in the current decade, long-term trends suggest the strategy remains as sound as ever.