Cheaper Groceries Means More Eating at Home.

A recent report from “Moody’s Investor Service” points out the decline in restaurant spending and a trend to cook at home. How much of an effect will this have on the small kitchen appliance industry.

Below CRW pulled the highlights from the report and we hope you find them useful.

Restaurant companies should brace for a challenging period as consumers grapple with the rising costs of rent, prescriptions and car loans and take advantage of cheaper groceries to eat at home more.

“Consumers are wrestling with higher nondiscretionary spending needs, while restaurant companies face higher operating costs, predominantly labor and challenged traffic trends,” Moody’s analyst Bill Fahy wrote in a note.
His comments come after a string of downbeat earnings from the sector, with the likes of Sonic Corp(SONC) , Burger King parent Restaurant Brands International Inc. (QSR) and Chipotle Mexican Grill Inc. (CMG) reporting declines in same-restaurant sales.
So what’s keeping consumers away from restaurants?
One factor is pressure on discretionary income from the rising costs of staples such as rent, medicine and education. Then there’s the steady rise in the cost of eating out, which has come just as grocery bills are getting cheaper. The cost of groceries has fallen 2.4% in the past year, government data showed in October.
Food costs have shrunk because of a global glut in farm products such as wheat, rice, soy and corn.
At the same time, the cost of food away from home—takeout dinners and restaurant meals—climbed 2.4%
“People need to eat, but they don’t need to go out to eat,” said Mark Kalinowski, restaurant analyst at Nomura, who said he believes there’s a “general consumer unease” that is also impacting spending habits.
Companies like Wendy’s Co.(WEN)have talked of the impacts on consumer confidence of the contentious U.S. presidential election and general civil unrest, as well as terror attacks in Europe and elsewhere.
Moody’s is expecting restaurant operators 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 supermarkets, which are better able to pass higher costs on to consumers.
Casual-dining restaurants—such as or Olive Garden(DRI) or Cheesecake Factory(CAKE)—are expected to hurt most, while fast-casual and fast-food restaurants—including the likes of Shake Shack(SHAK)and Chipotle as well as McDonald’s and Wendy’s—should outperform.

For complete article, please visit the following link: http://www.msn.com/en-us/money/markets/the-restaurant-recession-has-arrived/ar-AAjSQ4A?li=BBnbfcL