Walmart, the nation’s largest grocer, is capitalizing on the rising prices of fast food by offering customers cheaper meal options in its grocery aisles. According to Walmart Chief Financial Officer John David Rainey, it is about 4.3 times more expensive to eat out than to eat at home, and this price difference is benefiting their business. As grocery items remain the same price or become even cheaper, the gap between eating out and cooking at home continues to widen. This strategy has contributed to Walmart’s recent sales growth.
In contrast to Walmart’s success, restaurant companies like McDonald’s, Starbucks, and Yum Brands are struggling with declining foot traffic. Limited-service chains, which include fast-food and fast-casual restaurants, experienced a 3.5% decrease in foot traffic during the first quarter. Restaurant executives attribute this decline to bad weather in the early months of the year and a consumer slowdown, particularly among lower-income diners.
One of the reasons for the decline in foot traffic to restaurants is backlash against their prices. McDonald’s faced criticism when an $18 Big Mac combo sold at one of its franchised restaurants in Connecticut went viral on social media. However, fast-casual chains such as Chipotle, Wingstop, and Sweetgreen have reported strong sales in their most recent quarters, suggesting that not all restaurants are struggling.
The price difference between food cooked at home and food consumed at coffee shops or restaurants is evident in inflation data. The price of food at home has only increased by 1.1% year over year, while the price of food away from home has risen by 4.1% year over year. This data further supports the notion that eating out is becoming increasingly expensive compared to cooking at home.
To compete more aggressively with restaurants, Walmart has introduced a new grocery brand called Bettergoods. This premium line offers unique flavors and merchandise tailored for health-conscious customers or those with special dietary needs. With 70% of the brand’s items priced under $5, Walmart is targeting families who are looking for affordable meal options.
In conclusion, as fast food prices continue to rise, Walmart is seizing the opportunity to provide customers with cheaper meal alternatives in its grocery aisles. The company’s success in this area is evident in its sales growth and strong store traffic. On the other hand, restaurant companies are facing declining foot traffic and backlash against their prices. Walmart’s new grocery brand, Bettergoods, positions the company to compete more aggressively with restaurants by offering affordable and diverse options for customers.
