Americans eating out less amid economic concerns, says RBC
Capital MarketsEven those with higher incomes tightening their belts
NEW YORK, September 24, 2007 — Fifty-four percent
of Americans said they will eat out at restaurants less over
the next three months, according to a survey of 1,000 people
released today in conjunction with the RBC Capital Markets
Annual Consumer Conference, attended by some of the nation's
leading restaurant and consumer company executives and investors.
"Volatile stock markets, declining home values, higher
energy costs and overall concern about the economy are reducing
Americans' appetite for dining out," said RBC Capital
Markets equity analyst Larry Miller.
According to the study, the first of regular quarterly surveys
on the restaurant industry to be released by RBC Capital Markets,
even 35 percent of those Americans with higher household incomes
($50,000 or more annually) said they would eat out less, and
62 percent of Americans making less than $25,000 annually
said they would eat out less.
In fact, the study showed that Americans already have tightened
their belts, with two in five acknowledging that they are
dining out less frequently today than six months ago. Consumers
that cut back tended to fall into one or more of the following
demographics: females, Generation Y/Baby Boomers, household
incomes under $50,000, unemployed, Northeast and Southern
U.S. The 11 percent of consumers that said they increased
their frequency were predominantly male, age 18-29, single,
and prefer fast food. According to Miller, the concern among
Baby Boomers helps explain the relative weakness in casual
dining, as they are the core users.
The survey findings correlate with the latest RBC CASH (Consumer
Attitudes and Spending by Household) Index, a monthly nationwide
sample of 1,000 U.S. households. Consumer confidence declined
significantly this month as the CASH Index declined to 71.1
in September from 89.3 in August.
"The results of this month's CASH Index, a good leading
indicator of restaurant sales, do not bode well for spending
at restaurants," said Miller. "The negative responses
from both the CASH Index and our restaurant-specific survey
suggest that difficult times are likely to continue for restaurant
companies."
Of those surveyed who classified themselves as coffee drinkers
(roughly half of all respondents), 35 percent said they buy
their coffee most often at the local coffee shop; 28 percent
said Starbucks; one of five (20 percent) said McDonald's;
and 14 percent classified themselves as Dunkin' Donuts coffee
drinkers.
"As for whether McDonald's is eroding Starbuck's market
share, the answer is 'no,' since the consumers of coffee at
these two chains are polar opposites," said Miller. According
to Miller, Starbucks' customers are more likely to be female,
middle-aged, more highly educated and with a higher income
than their McDonald's counterparts. In fact, Starbucks claims
a greater share of Americans with college educations and those
with incomes over $100,000 annually than other vendors.
Respondents also were asked about the main factor they use
to choose which restaurant at which to eat out. Food quality
was overwhelmingly the driver of choice by 55 percent, followed
by menu offering at 18 percent. Price ranked third at 12 percent,
roughly in line with convenience at 10 percent. "This
suggests that the restaurant industry's aggressive pricing
in the past few years was not the cause of its traffic loss,"
according to Miller.
When asked what they are willing to spend their money on
now compared to six months ago, 40 percent said they were
less willing to order higher-priced entrées, appetizers
and desserts, compared to 26 percent who were more willing
to do so.
Despite busy lifestyles and irregular schedules, most Americans
say they still manage to eat breakfast at home. A full 74
percent eat breakfast at home, and a further 11 percent skip
breakfast altogether. McDonald's (seven percent) is Americans'
leading choice for breakfast out, with most of the remainder
(five percent) eating at restaurants, coffee shops and other
sit-down venues.
About RBC Capital Markets
RBC Capital Markets is the corporate and investment banking
arm of RBC and is active globally in debt origination, sales
and trading, foreign exchange, infrastructure finance, structured
products, metals and mining, and energy. Its North American
platform includes leading equity, underwriting, sales, trading
and research businesses and a significant U.S. middle market
investment banking franchise. Bloomberg ranks the firm as
one of the Top 20 investment banks globally.
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Contact:
Kevin Foster, RBC Capital Markets, (212) 428-6902, kevin.foster@rbccm.com
Loretta Healy, The Hubbell Group, (781) 878-8882, lhealy@hubbellgroup.com
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