2024 Rabobank BBQ Index
- Inflation has been running hot for a prolonged period and while
some relief from the heat is evident, consumers are exhausted from
historically high food prices and now exhibiting greater
frugality.
- In 2024, hosting a 10-person barbecue on the Fourth of July
will cost $99, the highest on record.
This year, beer, beef, soda and lettuce make up 64% of the total
cost.
- Personal balance sheets are in worse shape than a few years ago
with mounting debt, waning savings and lower real income resulting
in a loss of consumer confidence.
- With food pricing unlikely to reverse course, this might be the
last time we'll see a summer cookout for under $100.
NEW
YORK, June 26, 2024 /PRNewswire/ -- When it
comes to their stamina for paying historically high food
prices, U.S. consumers are gassed. Having borne the brunt of a
protracted post-pandemic inflation runup with extraordinary
resilience, Americans have finally hit the wall.
Over the past five years, a series of macro factors have
catapulted prices higher, weighing on their wallets and testing
their endurance. These hurdles included geopolitical crisis, severe
drought, higher restaurant overhead and wages, rising interest
rates and higher inflation throughout the supply chain.
As a result, food inflation jumped 25% from 2019 to the end of
2023. But the additional inflation we have seen in the first half
of 2024 on top of that, albeit far more modest, has been the
tipping point. Many consumers who stayed the course by continuing
to spend in the face of 40-year highs in food prices are now
pulling back and reevaluating their budgets.
"The consumer is waving the white flag on food inflation," said
Tom Bailey, senior consumer foods
analyst at Rabobank. "With an added 2% in price hikes in 2024
coupled with the cost disparity between dining out and cooking at
home at its widest margin in history, we're seeing heightened
fatigue and frugality."
Indeed, while the overall pace of inflation has moderated to
more normal levels since last summer, prices are still moving
higher. The 2024 Rabobank BBQ Index, which measures the cost of
staple ingredients for a 10-person barbecue, shows that it will
cost $99 to host a cookout on the
Fourth of July this year, up from $97
last year and $73 in 2018 (see chart:
Staying Hot). This year, beer, beef, soda and lettuce account for a
hefty 64% of total barbecue cost (see chart: Barbecue Breakdown).
That brings the inflation gain for a Fourth of July barbecue
up to 32% since 2019.
![Barbecue Breakdown Barbecue Breakdown](https://mma.prnewswire.com/media/2448763/Rabobank_Barbecue_Breakdown.jpg)
Not surprisingly, fewer Americans are choosing to eat out as
restaurants have passed along higher input costs, wholesale food
prices, rent and employee wages to their customers. A reported 68%
of people polled by Vericast say they are switching from
restaurants—where the tab is up 4.4% annually—to grocery stores,
which have seen only a 1.1% price hike. In 2022, U.S. consumers
spent more than 11% of their disposable income on food—whether at
home or at a restaurant—marking a 30-year high.
For most people, the sticker shock of going out to eat is
difficult to stomach. In 2023, 81% of restaurant operators surveyed
reported raising their prices in the prior six months. While that
number is trending lower this year, prices continue to rise.
In many ways, the impact of the rising cost of food is
emblematic of the broader economic trend in consumption. Retail
sales, a vital sign of the health of the U.S. economy, were weaker
than expected in May as higher borrowing rates and inflation
discouraged purchase decisions. In the second half of the year,
look for more of the same. "Retail sales will likely remain soft
throughout 2024," Bailey said.
Undoubtedly, the duration of inflation has taken a psychological
toll. Consumer sentiment, as measured by the University of Michigan's index, fell to 69.1 in
May, marking its lowest level since November
2023. Personal balance sheets have gotten messier too as
wages have not kept pace with inflation. Credit card debt, on
average, sits at $10,479 per
household—up from $8,763 in 2021—but
still below its all-time high of $12,424. Some 41% of Americans polled by
WalletHub say they have more credit card debt now than they did 12
months ago.
Further, excess savings, which soared to an all-time high during
Covid, have now sunk to an all-time low as
government aid, such as SNAP payments, the child tax credit,
increased unemployment benefits and a suspension of student loan
payments have ended. To be sure, people under the age of 35 have
been hit the hardest. Credit card delinquencies in this demographic
are at their highest level since 2011, according to the Federal
Reserve. And rent hikes have eroded the savings that some consumers
squirreled away during Covid lockdowns.
"Fiscal fitness is now more of a focus," Bailey said. "Saddled
with mounting credit card debt, waning savings and lower real
income, consumers are spending less."
The bottom line: A consumer's dollar is not going as far as it
did just a few years ago. Consider that the average American has to
work an hour to earn enough money for a six-pack of beer and a
burger today, up from 51 minutes in 2019 (see chart: Beer Money).
And they'll have to work nine hours to pay for a barbecue this
year, up 32% since 2019.
![Beer Money Beer Money](https://mma.prnewswire.com/media/2448761/Rabobank_Beer_Money.jpg)
Against this backdrop, families preparing for the time-honored
tradition of a backyard barbecue this Fourth of July are
increasingly hunting for bargains. In the first half of 2024, many
consumers have traded down, reducing the size of their purchases,
taking advantage of promotions or delaying big-ticket purchases
such as cars and appliances. This trend proved consistent across
age groups but was more pronounced among Gen Z and millennials,
according to a McKinsey & Company consumer insights survey.
Fifty-six percent of Gen Z and millennial shoppers polled—compared
with 45% of older generations—said their primary strategy was to
reduce the quantity or package size of the items on their grocery
list.
Still, millennials remain prone to giving in to their urge to
splurge. Their well-documented willingness to travel and attend
pricey concerts reflect this reality even as they have become more
selective under the prevailing financial constraints. A reported
78% of Gen Y respondents polled said they would rather spend money
on an experience than material goods. Perhaps the prospect of
student loan forgiveness, the pending wealth transfer from the Baby
Boomer generation and a "you only live once" mentality may be
boosting their penchant for "experiences over things."
Let's Make a Deal
With many consumers forced to
exercise more discipline, savvy shopping will come in handy before
firing up the grill. "To find bargains in beef this grilling
season, look for featured promotions at your local supermarket or
club store," said Lance Zimmerman,
senior beef analyst at Rabobank. "Beef prices may be at historical
highs but many store owners are willing to take a loss by putting
various cuts of meat on sale knowing shoppers will fill their carts
with other menu items—beer, burgers, hot dogs, sides and salads.
They want to boost foot traffic and win loyal customers."
Looking to save a few bucks on proteins? Prefer chicken as your
barbecue centerpiece? You can trim your budget by trading breast
meat for parts, such as drumsticks, wings and thighs. "In tough
times, chicken maintains its value," said Christine McCracken, senior poultry analyst at
Rabobank. "Right now, dark meat is gaining popularity. Consumers
are finding that thigh meat can be just as tasty as breast meat—and
it's less challenging to grill."
Fortunately for consumers, despite suffering from fatigue from
the inflation marathon, they can find attractive deals on quality
meats and drinks this summer. Recreating a restaurant experience at
home is now more palpable as the food industry has made strides in
enhancing taste, efficiency and safety.
"The quality of beef available to the consumer has never been
better," Zimmerman says. "In the past 20 years, we've seen the
availability of USDA prime and choice meat increase 60% as improved
cattle management has created more marbling. Those fatty flecks
pack a lot of tenderness and flavor while making it easier to
grill. Even if you overcook quality meats a little, they won't turn
into shoe leather."
Where's the Beef?
The expectation of tighter U.S. beef
supplies is leading the market higher as severe drought and
challenging business conditions forced U.S. cow-calf producers to
liquidate cows over the last five years. Consumer prices should
continue to ratchet higher, hitting new record highs throughout the
summer grilling season. Higher U.S. prices have caused beef exports
to shrink but domestic beef demand has held up well. Trading down
to different cuts and grades of beef—like switching from steaks to
burgers—can offset the pinch consumers are feeling from inflation
and economic hardship.
In poultry, demand for chicken has improved as consumers seek
lower-cost, high-value proteins. Rising beef prices have led many
restaurants to offer more chicken options on their menus. Retail
stores are also putting more chicken on sale. Breast meat
has found its way back to the top of the circular, while
lower-cost thigh meat and legs are getting good traction as
budget-friendly protein alternatives.
Bloated Inventory
The beer industry is coping with a
series of issues including a glut of inventory, an inability to
raise prices after 14 years of hikes and a continuing long-term
trend of losing market share to spirits and ready-to-drink
cocktails. Nearly every beer category, except imports, saw negative
growth in 2023. However, for the diehards, no barbecue would be
complete without a cold beer as evidenced by its 27% share of the
total barbecue cost. Non-alcoholic beer has been a surprising new
revenue stream for brewers, pacing the 31% rise in sales across
non-alcoholic adult beverages in 2023. Look for this newbie to find
a place at the barbecue table this year.
Americans Love Their Cheese
U.S. consumers can't
get enough cheese, especially in the summer. Consumption
continues to grow as a whole and across nearly every cheese
variety. U.S. dairy processors are investing in new capacity, with
new cheese plants opening this year to meet growing demand—both at
home and abroad. Adding cheese to your burger this Fourth of July
will be cheaper than the nachos served during a December football
game but it is still marginally more expensive than it was a year
ago.
Demand for butter remains robust, pulling cream away from ice
cream in recent months. Ice cream prices are up from year-ago
levels, contributing to the increase in the total index.
Consumption is not as high as it once was as competition among
desserts continues to intensify, with some consumers shying away
from ice cream in pursuit of a healthier diet. Still, a recent
International Dairy Foods Association survey showed that more than
97% of Americans enjoy ice cream, with vanilla as the most popular
flavor.
Flat Is the New Up
Soda prices have held up well with
increases still sitting above inflation. Sales volumes are flat,
which is fairly solid performance given above-inflation pricing and
tough economic conditions. Soda has benefitted from flavor
innovation, tailored sizes and package types and a focus on gut
health—a notable source of growth. Meanwhile, energy drinks and
sports drinks have been the standouts among non-alcoholic
beverages, powered by strong innovation and newer entrants taking
market share.
A Mixed Bag
Last year, we saw elevated inflation
across the board and fresh produce was no exception. California's drought sent lettuce prices to
more than $100 a carton, well above
the average range of $15 to
$20 per carton. Prices have since
come down significantly, which is good news for consumers stocking
up on the popular burger topping. We expect leafy greens to have
steady supplies, good quality and decent prices. Potatoes, also hit
hard by drought, bounced back due to an aggressive planting season
and increased water availability in 2023. This year, grocery
shoppers have seen potato prices drop to about half of what they
were a year ago. Yet, we're still seeing sticky inflation in potato
chips with prices rising more than 25% in the past two and a half
years.
Separately, tomato prices have moved higher in 2024 as dry
weather in Mexico has curtailed
production and overall availability. There has been a lot of change
within the category as snacking tomatoes have become a larger
portion of overall production. Their chief characteristics—smaller,
sweeter and multi-colored—make them more appealing to families with
kids who can bring them to school as a snack or grab a handful at
this year's barbecue.
Premium Buns for the Win
Bakery goods have felt the
impact of price increases in 2023, resulting in lower sales
volumes. It's not that Americans are eating fewer burgers—they eat
more than 50 billion every year—but they became more aware of waste
and opted for smaller packages. Hamburger and hot dog bun prices
have been stable, in line with overall grocery inflation. Recent
price hikes have been a boon for private-label bread and premium
baked goods, as consumers trading down from eating at restaurants
opt for differentiated products at home. Don't be surprised if you
see a pretzel bun at this year's Fourth of July barbecue.
Rationale and Methodology
The Rabobank Barbecue Index
assumes an average American BBQ situation—a mix of family and
friends—on Fourth of July weekend. That includes 10 adults with
each consuming the same amount of food and beverages. We assume
each person will consume one cheeseburger with lettuce and tomato,
one chicken sandwich with lettuce, tomato and a slice of cheese,
two handfuls of chips, two beers, a soda and a few scoops of ice
cream. As a means of comparison, the BBQ Index parallels the Bureau
of Labor Statistics as a data source. We selected the monthly data
series "average price index, U.S. city average."
About Rabobank
Rabobank Group is a global financial
services leader providing wholesale and retail banking, leasing,
and real estate services in more than 38 countries worldwide.
Founded over a century ago, Rabobank today is one of the world's
largest banks with over $660 billion
in assets. In the Americas, Rabobank Wholesale Banking North
America is a premier corporate and investment bank to the food,
agribusiness, commodities and energy industries.
Rabo AgriFinance, a subsidiary of Rabobank, is a leading
financial services provider for farmers, ranchers and
agribusinesses in the United
States. Together, we provide sector expertise, strategic
counsel and tailored financial solutions to clients across the
entire value chain.
Visit www.RabobankWholesaleBankingNA.com and www.RaboAg.com.
MEDIA CONTACTS
Melanie Bernds
Public Relations, Rabobank
melanie.bernds.smith@raboag.com
Kevin Burke
Marketing
& Communications, Rabobank
kevin.burke@rabobank.com
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SOURCE Rabobank