What Do Recent Economic Numbers Mean For Your Drinks Sales?

We've all read the headlines and heard the almost daily updates about the dire state of the economy. Lackluster numbers about jobs, the stock market, gas and food prices, etc., are leaving consumers feeling less than confident about spending, begging the question, what does this mean for your beverage business?

However, the restaurant industry remains somewhat unscathed by recent economic reports. Recently, the National Restaurant Association (NRA) released its June Restaurant Performance Index, which reported operators had a positive outlook for the future. In fact, 51% of operators are planning to make a capital expenditure on equipment, expansion or remodeling in the next six months.

As VIBE reported in Chain Beverage Buzz, Yard House is planning to open eight new restaurants in the next 12 months, and executives at Darden Restaurants, OSI and Palm Management Corp. are all spending money on renovations at Olive Garden, Outback Steakhouse and Palms restaurants, respectively. Keeping things updated to attract new customers is the key to surviving and thriving in difficult economic times.

Yet consumer spending, which accounts for 70% of economic activity, decreased 0.2% in June after a 0.1% gain in May, according to the Department of Commerce; this is the biggest drop since September 2009. Additionally, the U.S. Bureau of Labor Statistics July jobs report marked unemployment at 9.1%.

Hudson Riehle, Senior Vice President of the NRA’s Research and Knowledge Group, said restaurants added 205,000 jobs during the past year, which is seemingly good news, and yet that number is still down 161,000 from its peak during prerecession times. This year started out with 68,800 restaurant jobs added in the first quarter and another 20,200 added in the second quarter, but during the first month of the third quarter only 300 positions were created.

What’s more, fuel costs are crippling consumers. In May, the cost of gasoline was at a three-year high at $4 a gallon and remained above $3.70 at the end of July, according to AAA.

Because of these numbers, the savings rate climbed to 5.4%, the highest its been since September 2010. While that's good news for overall financial security, it indicates a decline in discrecionary spending ability. This news, coupled with Riehle’s research that indicates two out of five adults are not using restaurants as much as they’d like, means that in many instances consumers are opting to stay at home and save money.

On the surface, the combination of these factors doesn't bode well for the restaurant industry, but operator optimism reflects a commitment to smart, value-oriented promotions and programs that entice guests to open their wallets. Great drinks at a good value was the most important beverage factor in determining which bar or restaurant adult consumers visited in an online survey of more than 500 adult patrons of casual dining restaurants conducted by Next-Level Marketing in February. 

Tell us, what are you doing with beverage programming, pricing and promotions to attract customers who are otherwise wary about going out and spending money? Click here to share your insights. We plan to compile coverage of best practices for delivering value in today's environment. Stay tuned! 


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