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Know Thine Enemy: Return Of Restaurants

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John Ross, president and CEO of IGA Inc.

What happened in 2010?

We should all know the significance of this year. It is the year that Americans started spending more on food away from home than at home, according to the USDA. 

In recorded American history, and probably human history, society started letting others cook for us more often than we cooked for our families.

Eating out had been growing relative to cooking at home for two decades. As Americans embraced two-income families, over-achieving extracurricular kids and longer commutes, the number of families that chose to cook dwindled. 

But a big driver was also affluence. Continuous GDP growth, low unemployment and low inflation fueled the drive to let others cook. When consumers believe their time is more valuable than their budgets, restaurants win. 

The restaurant industry deserves a lot of credit for this, too. The emergence of quick service and family restaurant national chains – with bigger and more sophisticated national advertising budgets – started in the 1970s. They have been growing their national and local advertising spending faster than the grocery channel for more than a decade. 

But they aren’t just spending more – they are marketing in increasingly smarter ways. They market to different demographics with unique ads for young adults, families with children, single adults and retirees. 

They market by mealtime, with ads for breakfast, lunch, dinner, in between, late night. And they market by occasion, with ads for date night, birthdays and after work socializing.

Reflect on this point: the grocery industry invented branding and mass advertising as we know it. CPG companies are heralded as master marketers, and yet Panera and Red Lobster and Arby’s have figured out how to target consumers when they are hungry, ready for a night out or for a meal on the way to work.

And then came COVID-19 and everything changed. In an instant, they were shut and we were open. They laid off workers and shuttered locations. They scrambled to figure out pickup and delivery, while we struggled to keep pace with store volume. And the line reversed, with more Americans eating at home as they did back in the 1990s.

Even after they were allowed to reopen, restaurants had to space out tables, configure outdoor seating and all the things we have experienced for the past two plus years. 

And their customers – the ones they lured away with dollar meals, breakfast burritos, date night appetizer specials and clever marketing – were back in our stores, figuring out how to cook at home.

Many young adults said they cooked for a first time during the pandemic, according to IRI data. Cookware sets, cook tops, ovens and other cooking gadgets were sold out nationally. COVID forced a generation of people to learn or relearn how to cook. 

What’s great for our industry is that in learning how to do it, they learned that they actually liked it – cooking at home tastes better, is healthier and less expensive. 

A majority of young shoppers who starting cooking more during COVID – over 70 percent, according to YPulse, a market research firm specializing in data on Gen Z and Millennials – say they plan to continue cooking once the pandemic ends.

As we (hopefully) emerge from the pandemic and people return to entertaining, traveling and dining out, the gains the grocery industry made during COVID are eroding. 

Currently we are at parity, with about as many meals eaten at home as eaten away or delivered. That share, though, is ours to lose if we don’t rethink how we market to consumers.

I encourage you to gather the team and brainstorm. If restaurants are really the competition – and not other grocers – then what should we do differently? Remember that their weapons are centered around convenience. For time-stressed shoppers, figuring out how to balance work and family and mealtime is a big deal. 

But we have powerful weapons, too – prepared meals, ready-to-heat, ready-to-cook. We also have innovation in center store and frozen, which let shoppers make great meals in less time than it takes to go through the chore of packing up the kids, waiting for a table and waiting for food. 

And we have two even more powerful weapons – freshness and value. 

Restaurants can’t hold a candle to the freshness of ingredients in our stores. Not even close. Of course, consumers won’t realize it if we don’t tell them. Whatever you make each day – sushi, pizza, fried chicken, potato salad, etc. – is fresher than anything that’s coming out of Chipotle and Olive Garden. Which means it tastes better.

And with inflation soaring and shoppers worrying how to make ends meet, the value of cooking fresh at home is more important. The cost for a family meal per head is more than double at a family restaurant; triple if using Uber Eats or other delivery services.

Be overt and showcase how far a dollar goes when cooking at home. Build a marketing plan to take them on, attack their weaknesses and showcase strength. Do that and you will not just hold onto but grow the share of meals at home.

For more news from IGA, visit iga.com.

About the author

John Ross

President and CEO of IGA

John Ross is the president and CEO of IGA, the world’s largest voluntary supermarket network with aggregate worldwide retail sales of over $40 billion per year.

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