Gas Prices Down -- Drinks Up?

Consumer price sensitivity even with falling gas prices

Gas prices averaged $2.08 per gallon nationally at the end of last week, the lowest seen since mid-2008, which marks nearly three consecutive months of declines, according to AAA. Simultaneously, we’ve seen an uptick in casual-dining restaurant same-store sales, with the segment growing 4.9% in quarter three 2014. Between gas prices plummeting and employment improving (although wage growth is flat), consumers have more money in their pockets these days and are feeling more confident overall. In fact, consumer confidence reached 92.6 in December, the seventh consecutive month of confidence trending above 86, which is the longest stretch we’ve seen at that level since late 2007. Recent Technomic consumer insights reveal that restaurants are among the top five beneficiaries of that increased disposable income in 2015.

While it’s great to report these positive trends, there are always caveats. The first is that sliding gas prices will likely level off and even increase in the weeks ahead. Historically, prices rise at the pump in February as refineries make investments in anticipation that demand rises with temperatures. The second is that consumer price sensitivity remains high for dining-out occasions, and drinks are not immune. Cost is still the primary influencer of drink selection and the appeal of promotions or discounts continues unabated, according to BarTAB and other Technomic research. Younger consumers (age 21-34) are by far the most cost-conscious when ordering drinks on-premise.

So while consumers may be more inclined to go out for the evening, their keen eye for value isn’t blinded by the presence of a little extra money in their wallets. Delivering a stellar beverage experience at an attractive price point can entitle your operation to some of that surplus. 

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