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Menu price inflation catches up with the grocery store

For the first time in a year and a half, the annual increase in prices for food away from home exceeded inflation at retail food outlets.

Jonathan Maze, Senior Financial Editor

April 12, 2023

2 Min Read
menu
Restaurant menu prices increased at a faster rate than supermarkets last month. / Photo: Shutterstock

Menu price inflation has finally caught up with supermarket inflation.

Prices at restaurants, workplace cafeterias and school lunch programs increased 0.6% last month, and 8.8% on an annual basis, the U.S. Bureau of Labor Statistics said on Wednesday, as foodservice inflation remains elevated even as operators report easing prices for labor and food.

Retail food prices, meanwhile, fell 0.3% last month and were up 8.4% year over year. It was the first time menu price inflation exceeded retail price inflation on an annual basis since September 2021.

The inflation gap between the two major purveyors of food to consumers, which was 5.5 percentage points last August, has been narrowing for months as easing food costs have prompted retailers to ease up on prices.

Restaurants, however, have continued to push their prices higher. While at least some of the 8.8% is due to the end of free school lunch programs that caused those indexes to soar, inflation remains historically high at traditional restaurants.

Prices at full-service restaurants rose 0.7% last month, up 8% on an annual basis.

At limited-service restaurants, prices increased 0.5% monthly and 7.9% year over year. In both instances, restaurants have been raising prices at a steady clip for much of the past two years.  

Restaurants have been raising prices because of historically high inflation for both food and labor costs. Retailers’ prices were increasing largely because of commodity inflation, which comprises the bulk of their costs. As food prices have eased, retail prices have come down, while restaurants have continued to raise them.

The drop in grocery store prices could become a pressure point for industry sales this year if consumers perceive restaurants as a worse value.

The gap in pricing last year was considered something of a backstop for restaurant sales at a time when operators hiked prices far more than normal. Now that gap is gone.

The overall inflation rate increased 0.1% in March.

About the Author

Jonathan Maze

Senior Financial Editor, Nation's Restaurant News

Follow @jonathanmaze

Jonathan Maze covers finance for sister publication Nation's Restaurant News, as well as restaurant chains based in the Midwest. 

Jonathan came to NRN in 2014 after seven years covering restaurants for Franchise Times Magazine and the Restaurant Finance Monitor. There, he created an award-winning blog that reported on and analyzed the restaurant industry. He is routinely quoted in various mainstream press articles, including the Associated Press, Washington Post, Orlando Sentinel, Denver Post and Yahoo! Finance.  He lives in a suburb of Minneapolis with his wife, two children and their cat.

Reach Jonathan at [email protected], or by phone at 651 633-6526.

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