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Wednesday, November 9, 2022

It could be cheaper to eat at a restaurant this Thanksgiving - CBS News

While eating out is typically more costly than dining at home, going to a restaurant could be a relative bargain this Thanksgiving compared with high grocery store prices. 

Restaurant prices are also elevated, but they have risen at a slower pace. The cost of food at restaurants and other vendors is up 5.8%, compared to food from grocery stores or supermarkets, which shot up nearly 10% from November 2021 to August 2022, Wells Fargo analysts noted in a report

Thanksgiving-specific food items — including eggs, flour and fruits and vegetables — purchased at stores are even more costly, having risen 14.9% over that time, according to the report, which was based on consumer price index data.

"The CPI is basically telling us the cost of inflation at the grocery store is exceeding that of eating out," Wells Fargo specialty crop analyst Brad Rubin told CBS MoneyWatch. 

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Why are groceries so expensive? 

Rising commodity costs more directly affect food prices at grocery stores than at restaurants because the latter also factor overhead and labor costs into their menu prices. In other words, commodity ingredients make up a smaller percentage of restaurants' total costs. 

Grocery prices also fluctuate more rapidly as commodity prices rise and fall. 

"They are selling to consumers and if supply is tighter, their costs go up and they need to make a profit margin," Rubin said.

By contrast, restaurants buy food inputs in bulk and typically don't need to increase consumer prices as sharply or rapidly. 

Given that some Thanksgiving dishes will cost roughly the same at restaurants as it will to prepare them at home, some Americans may opt to skip the hassle of hosting the annual feast and dine out instead. 

"If you're a family of four and you have to prep and buy commodities associated with that Thanksgiving meal, it actually may benefit you to go out to eat — it will be a similar price," Rubin said. "It's considered a luxury to some, and this year there is a lot of value in eating out."

Restaurants do eventually increase prices to cover price shocks, which could lead to a widening of the gap between the cost of eating at home versus eating out in 2023, according to a Bank of America research note. In other words, the time to make the most of eating out is now. 

Bad weather led to a crop shortage this year, driving up the cost of potatoes, onions, celery and carrots. Cranberry sauce — a Thanksgiving staple — will also cost more this year. 

In its October report, the United States Department of Agriculture (USDA) warned of a possible turkey shortage following bird flu outbreaks that wiped out producers' supplies. The cost of the main menu item for Thanksgiving — turkey — is expected to be 23% higher compared to last year. 

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As inflation continues to sock consumers, some retailers around the country are cutting their prices for Thanksgiving foods. Walmart said last week it is keeping traditional holiday food items at last year's prices, including ham, potatoes, stuffing, cranberry sauce, mac and cheese, and pumpkin pie. It is also selling whole turkeys for almost half the national average, according to the retailer. 

And Discount giant Aldi last week started offering sales on up to 30% of holiday favorites at its 2,200 stores in 38 states, saying it would match its 2019 prices on items like brie cheese, prosciutto, cornbread stuffing, rolls and apple pie.

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It could be cheaper to eat at a restaurant this Thanksgiving - CBS News
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