What's Prompting the Rise of Chipotle Nation

Organic, free range, hormone-free, responsibly raised. Oh, and don't forget fast, cheap and convenient. Who says consumers don't know what they want? JL

Justin Fox reports in Bloomberg:

Outside of this "fast-casual" segment, growing at 7 percent to 8 percent a year, visits to full service restaurants are down. What's driving the sharp gains in consumer spending are hormone-and-antibiotic-free burgers, burritos filled with responsibly raised pork and Thai chicken salads.

We're coming up on a weekend when people in the U.S. (and many other countries) will do a lot of eating. What will they be eating, and where? I've been wondering about these things in the context of recent business news: Why is McDonald's struggling while other fast-food restaurants thrive, and some even have money-gushing initial public offerings? Why have sales at Kraft Foods Group been so tepid? Inquiring minds demand to know. So I did a data dive.

First, the long view. As the U.S. became more affluent in the decades after the Great Depression, people ate out more:

There was a boom in eating out during World War II -- in part because, in this data series, eating in a military mess hall or a corporate cafeteria counts as dining out -- and a clear lull in the 1950s as Americans made use of their nice new suburban kitchens. Then, beginning in the early 1960s, came a long, steady rise in the percentage of food spending going to dining establishments. In the 2000s, things slowed down. Surveys of food consumption show a similar trajectory, albeit with a more pronounced slump in the 2000s:

This is from a 2013 article in Nutrition Journal that also examines how much time Americans spend in the kitchen compared with the 1960s (men slightly more, women a lot less). A fuller if harder-to-read version of the above chart, with low- and high-income consumers included (low-income people eat less away from home, high-income people more) is here.
The U.S. Department of Agriculture has more recent data that doesn't exactly line up with the numbers in the chart but it does show a continued decline in away-from-home calories in 2009-2010 and the tiniest uptick in 2011-2012.
What explains this apparent end to the Great American Restaurant Boom? Bonnie Riggs, a veteran restaurant-industry analyst at the market-research firm NPD Group, gave me three somewhat-interrelated explanations:
1. Median household income stopped rising in 1999.
2. Women's labor-force participation rate stopped rising in 2000.
3. People always head back to their own kitchens during recessions, and there have two recessions since 2000 -- the second one a humdinger.
Still there are signs in the consumer-spending data that something new may be afoot. Here's a comparison -- over the course of the business cycle -- of monthly spending on meals out versus spending on food purchased to eat somewhere else. Just to be clear: Americans still spend more on food-to-take-somewhere than on restaurant meals ($685 billion a year to $500 billion, as of February). I just indexed both to 100 at the start of the last recession in December 2007 to make the comparative trajectories clearer:

That's a pretty sharp rise in restaurant spending since the beginning of 2014. It is not, however, caused by more people going out to eat, Riggs says -- NPD Group's surveys show no significant increase in restaurant visits. Instead, people are spending more when they go to restaurants. And here's another interesting thing: they're not spending it on fancy sit-down meals.

Spending at limited-service eating places -- fast food -- is rising much faster than spending at full-service restaurants. "What's been driving that," Riggs says, "is really fast-casual: Chipotle, Panera, Five Guys." These are nicer restaurants, with more-expensive ingredients, that still make you order at the counter. Outside of this "fast-casual" segment, which is growing at 7 percent to 8 percent a year, visits to fast-food restaurants are little changed. Visits to full-service restaurants are down. What's driving the sharp gains in consumer spending at restaurants, then, are hormone-and-antibiotic-free burgers, burritos filled with responsibly raised pork and Thai chicken salads.
Meanwhile, back at home, Americans are eating differently, too. Or at least buying different things to shove in the fridge and forget:

To be sure, U.S. consumers still spend a lot more on meat, poultry, cereals and baked products than they do on fresh fruit and vegetables. But spending on fruit and veggies is rising the fastest, and spending on meat and poultry has actually fallen sharply since the beginning of 2014. So enjoy your kale salad this weekend -- and see you at Chipotle when you discover you're still hungry.