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Eating Out vs Rising Food Prices

28 May 2015 in Trading Ideas

Should you feed your portfolio on the growing popularity of dining out? Or do you invest in companies that feed us during a period of time that supermarkets are gobbling up more of our daily budgets?

 

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PLACE YOUR ORDER

From fast food to fine dining, eating our meals outside the home has become an American way of life. In 2012, spending on food away from home in the US reached its highest level since 1970, taking a 43.1% share of total food spending.1

That’s also meant steady growth for restaurant sales, which grew for a fifth consecutive year in 2013 at a compound annual growth rate of 3.7% to $659.3 billion – and by 3.6% in 2014.2 The rise of two-earner households combined with the increase in more affordable and convenient locations has helped drive the popularity of dining out – so much so that 55% of US operators reported a same-store sales gain in the one-year period ended March 2014.3 Now that’s food for thought.

 

TO MARKET TO MARKET – TO PAY A LOT MORE

We see it every time we head to the checkout line: food prices are eating up more of our budgets than ever before. The USDA notes that in December 2012, it cost $248 a week to feed a family of four. That’s a 41% jump over the past 10 years.4

And it’s not just a US phenomenon. In 2012, global food prices rose 2.7%. The World Bank global food price index increased 104.5% between 2000 and 2012, at an average annual rate of 6.5%.5 Population growth, biofuel production, supply shocks due to extreme weather, and other factors will continue to put upward pressure on our grocery bills. And that could fill up the carts of companies that feed the world.

 

STOCKS IN THE EATING OUT MOTIF

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STOCKS IN THE RISING FOOD PRICES MOTIF

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(1) US Department of Agriculture, Food Consumption and Demand, Nov. 22, 2013, http://www.ers.usda.gov/topics/food-choices-health/food-consumption-demand/food-away-from-home.aspx, (accessed May 28, 2014).

(2) Statista graph, “Restaurant industry food and drink sales in the US from 1970 to 2014,” http://www.statista.com/statistics/203358/food-and-drinks-sales-of-us-restaurants-since-1970/, (accessed May 28, 2014).

(3) Teri Williams, “Industry Forecast – Casual Restaurants Still Struggling,” great-taste.net, May 20, 2014, http://www.great-taste.net/tidbits-kudos/tidbits/industry-forecast-restaurant-visits-deal-discount/.

(4) U.S. Department of Agriculture, “Cost of Food at Home,” January 2012, http://www.cnpp.usda.gov/ (accessed 2/1/2012)

(5) “Global Food Prices Continue to Rise”, Apr 11, 2013 http://www.worldwatch.org/global-food-prices-continue-rise-0 (accessed Oct 01, 2013)

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