Home Coffee prices Breakfast sales remain stable as people returning to the office reduce elsewhere

Breakfast sales remain stable as people returning to the office reduce elsewhere

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Consumers may be eating less at restaurants, but breakfast sales are holding up as people return to the office and grab a quick bite or an iced coffee on the way to work.

Overall traffic to restaurants fell 2% in the second quarter from a year ago as inflation drove up menu prices, according to market research firm The NPD Group. The only unchanged category: breakfast and morning snacks.

Restaurant companies like Starbucks say morning sales are partly driven by a return to their pre-pandemic work routines. David Portalatin, food and beverage analyst at NPD, also noted the relative affordability of breakfast items.

“For a lot of people it’s just a cup of coffee and maybe a specialty coffee that they pay a premium for, but that’s somehow more manageable,” he said.

The cost of food outside the home rose 7.6% in the 12 months to July, according to the Bureau of Labor Statistics. Take-home food prices soared even higher, rising 13.1%.

Kathleen Flynn, a 26-year-old photo producer in New York, said she rarely eats out these days and is cutting back on spending. But she still stops at a café, La Cabra, every morning for a cardamom bun and a cappuccino.

“I have to do it because it’s my joy,” Flynn said.

A return to normal

Before the pandemic, the restaurant industry saw breakfast as the biggest opportunity to increase sales and retain new customers. Fast-food chains have improved the quality of their coffee and morning menus to convince people to use the drive-thru to get to work or school.

In early 2020, just weeks before shutdowns, Wendy’s launched its breakfast menu nationwide, joining McDonald’s, Taco Bell, Burger King and Chick-fil-A in offering the morning meal.

But when the pandemic hit and closed offices and schools, breakfast saw the biggest drop in sales. Starbucks reported that customers were buying lattes and macchiatos later in the day. Many Taco Bell locations opted out of serving breakfast and opened later in the morning due to staffing issues. By contrast, General Mills and Kellogg saw sales of staples like cereal and Pop Tarts rise, while demand for orange juice rose for the first time in years.

More recently, as people have started going out more often and re-establishing their daily routines, the trend is reversing. Total spending at quick service restaurants, which includes fast food outlets and cafes, rose 32% in the 52 weeks ended June 12, compared to 2019 levels, according to data from market research company Numerator.

“Now that we’re going back to more normalized behaviors, we’re really going back to the older trend where breakfast generally outpaced the growth of other slices of the day,” Portalatin said.

More and more Starbucks customers are buying their morning coffee again. The company’s outgoing chief operating officer, John Culver, told investors in early August that 51% of the chain’s sales in its last quarter were in the morning, closer to pre-pandemic levels. The company expects morning sales to strengthen even more as commuters return to the office.

Strong breakfast sales supported McDonald’s U.S. same-store sales growth of 3.7% in the second quarter, executives said in late July. The chain hasn’t brought back its popular all-day breakfast menu, meaning Egg McMuffin fans now have to get up earlier in the morning.

Donut lovers are also buying their boxes of Krispy Kreme earlier in the day.

“People are starting to engage in the donut for the office et cetera in the morning, so we’re seeing some growth there,” Mike Tattersall, CEO of Krispy Kreme, told CNBC.

Paris Baguette, a coffee-bakery chain based in South Korea, saw its breakfast traffic in the United States jump 20% from pre-pandemic levels, according to Nick Scaccio, US vice president of company operations. He attributed the chain’s strong growth to a coffeehouse partnership with Lavazza and its efforts to build brand awareness.

The War of the French Toast Sticks

Breakfast remains a largely untapped opportunity for the restaurant industry, with many people still choosing to eat cereal or eggs at home. The meal represents about 20% of the restaurant’s transactions, according to NPD.

And in terms of spending, breakfast accounts for only about 13% of total fast food sales, according to Technomic director David Henkes.

But restaurants and convenience stores were gaining new customers the morning before the pandemic. And as they look to rebuild their traffic and sales in the coming months, many are putting more effort into marketing their morning menus.

The push is apparent in this summer’s French toast wars. After Sonic and Burger King added versions of the portable treats to their permanent menus, Jack in the Box brought back their version as a limited time offer. Earlier this month, Wendy’s introduced its Homestyle French Toast Sticks.

“[Fast-food chains] in particular, are really innovating around new menu items to try and capture those incremental sales as consumers start to return to breakfast day in restaurants,” Henkes said.