Despite Economy, Some Still Willing to Spend More for Premium Ingredients: Technomic

In its latest report about consumers' shifting meal preferences, foodservice consultants Technomic said while consumers are definitely spending less money dining out, many are still willing to spend more on "higher quality" menu items if they include premium ingredients.

According to finding revealed in the Consumer Pricing Strategy Report, more than six out of ten consumers (61 percent) said they would spend more for a higher quality sandwich if it contained premium meat; 41 percent if it were made with premium cheese; and 34 percent if it contained premium bread.

The report focuses on consumer and operator responses as the U.S. restaurant industry has been hit by a "perfect storm" of price pressures. It looks across income segments, meal day-parts and restaurant segments at consumers' attitudes toward and perceptions of menu price increases, and at how consumers expect their foodservice spending to change in the future, among other issues.

Some of the more interesting consumer findings include:
-- Only 25 percent of consumers say that restaurants are increasing prices because they want to make more money; instead, three out of four attribute rising menu prices to increases in the cost of gasoline and ingredients.
-- The vast majority of consumers (91 percent) who are cutting back on restaurant spending say they are dining out less frequently. However, one-third (32 percent) are purchasing less expensive food when eating out, and one-fifth (19 percent) are ordering smaller amounts and portions.

Overall, consumers are cutting back more at full-service than at limited-service restaurants. Lower income consumers are decreasing purchases at both types of venues.

Consumers realize that menu price increases are inevitable. However, the majority (56 percent) of consumers would prefer that restaurants increase prices slowly over time to meet a specific price, rather than raising prices all at once, or by substantially increasing pricing on certain items.

"Consumers are spending less on dining out and feel they have to allocate restaurant spending more wisely," says Darren Tristano, Technomic e.v.p. "Restaurant operators must offer a strong value equation to compete successfully for those dollars. Knowing when, how and how much to raise prices requires research into consumer intentions and behaviors as well as a close examination of industry practices."

The new report was designed to help operators evaluate factors in terms of their own unique needs, menu price structure and customer base, so that the changes they make will preserve profitability.

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