The Chicago Journal

Prices of 2022: the highs and lows

Edward Anderson Edward Anderson on February 13, 2023

Image source: Sky News

Prices: The United States experienced its highest level of inflation last year.

The Federal Reserve has been battling inflation throughout 2022 and has used all available options, including hiking interest rates.

Price hikes

Recent data on inflation from the Bureau of Labor Statistics show a decline in price rises to 7.1%.

Retail prices increased 7.6% (inflation unadjusted) between November 1 and December 24, making it impossible for customers to purchase gifts without going over budget.

The information was provided by the Mastercard Spending Pulse, which looks at retail purchases beyond auto sales.

The cost of holiday meals skyrocketed throughout 2022 as food prices increased faster than inflation.

Some products had remarkable double-digit growth, but others experienced no change or a drop.

Electronics

As soon as the demand for expensive electronics fell, retailers noticed a change in consumer behavior.

Prices for major electronics decreased throughout the year that ended in November.

  • Smartphones plunged 23.4%
  • TV prices dropped 17%
  • Computers rolled back prices by 4.4%
  • Major appliances fell by 1%

Several businesses, like Best Buy and Walmart, stocked up at the beginning of 2022 in preparation for supply chain problems and anticipated rises in consumer demand.

Their plans, however, were derailed by mounting prices and declining client confidence.

In addition, during the early stages of the epidemic, when people were confined, they made significant purchases or upgrades.

Read also: Real estate market hopes for consistency this year

Apparel & toys

Although slowly, apparel prices rose last year.

  • Clothing prices rose by 3.6%
  • Footwear increased by 2.3%
  • Sporting goods climbed 2.7%
  • Toys had a meager 0.6% increase

The items were a bargain despite the slight price increase because inflation surpassed it.

In December, Walmart CEO Doug McMillon made the following remarks:

“In toys, sporting goods, categories like that, prices have come down more aggressively.”

“We’re still inflated, but we’re not inflated nearly as much as we are in the other categories.”

However, because retailers overestimated client demand, there was a stockpile of extra goods.

Stores made offers to move inventory, enticing customers to make purchases.

Retailers were able to control prices as a result.

Plane tickets

The 2020 pandemic prompted air travel demand to decline, dropping to an all-time low.

However, it was revived last year.

However, the cost of travel increased by 36% yearly.

Glen Hauenstein, the president of Delta, described the increase as “unprecedented” in March.

“I have never seen… demand turn on so quickly as it has over Omicron,” said Hauenstein.

Airlines made a record amount of money in April, May, and June due to high airfares and congested flights.

Two years after the pandemic-induced lockdowns, they made a full-force comeback owing to travelers.

Gas prices

The cost of land travel increased.

The price of gasoline increased by 10.1%; however, it has since fallen from its record highs.

Gas price volatility was caused by the Russian invasion of Ukraine and geopolitical plans that depended on the availability of oil.

GasBuddy predicts the chances of the national average returning to the $4 per gallon price level could occur as early as May.

The fuel price tracking app GasBuddy does not anticipate another year of extreme volatility.

Read also: Minimum wage to go from $7 to $15 this year

Food prices

Food prices increased by 10.6% in 2022, which is more than overall inflation.

Numerous factors contributed to price increases for particular supermarket items through November 2022.

Egg prices rose by 49.1% as a result of the terrible avian influenza, a lack of supplies, and excessive demand.

Margarine prices increased by 47.4% due to the Russian invasion of Ukraine.

In addition, butter prices increased by 27% as the world’s milk supply plummeted.

Flour is an additional casualty of the Ukrainian situation.

The price of flour increased by 24.9% as a result of the disruption of the global grain market and high US transportation expenses.

In California, lettuce prices jumped by 19.8% as a result of crop disease.

Food prices increased by 12% over that period.

As the cost of eating out increased in 2022, many customers chose to accept higher prices as an alternative.

The price of dining out increased by 8.5% last year as restaurants raised menu prices to offset their rising material expenses.

Reference:

What got really expensive this year, and what got cheaper

Fast-food survive Q4 as a leader in revenue

Leah Cooper Leah Cooper on February 12, 2023

Fast-food – Businesses from a broad range of industries have already started to submit their quarterly results following the fourth quarter.

Overall, it’s a mixed bag, with fast-food restaurants performing well.

The good news is that casual dining and fast-casual restaurants have had problems attracting new patrons.

The news

Very few publicly listed restaurant companies have released their most recent quarterly results, despite the fact that the fourth quarter has concluded.

A new trend was emphasized by the few who reported it.

During the Christmas season, consumers who were dealing with inflation cut back on eating out and shopping.

Instead, fast-food outlets offer restricted menus and discounts to entice customers from a range of socioeconomic levels.

Economy resilience

The market has been affected by economic upheavals and downturns throughout the years, but the fast-food sector has consistently been among the most resilient.

For instance, McDonald’s, one of the biggest fast food chains in the industry, recorded same-store sales growth of 10.3%.

Low-income customers, who came more frequently than they had in the previous two quarters, were primarily responsible for the increase.

Executives claim that the Adult Happy Meal marketing was a resounding success.

When incorporated into McRib’s yearly return, they greatly enhanced sales.

Contrary to expectations from the industry, the fast-food giant’s US traffic increased for a second consecutive quarter.

Other chains

A different fast-food business, Yum Brands, said there was significant US demand.

Taco Bell’s domestic same-store sales increased by 11% throughout this time.

The increase in morning orders, the return of Taco Bell value meals, and the enduring appeal of Mexican pizza are the causes of the remarkable sales.

Pizza Hut’s same-store sales increased by 4% in the US.

KFC had a paltry 1% gain and difficult year-over-year comparisons.

In the next few weeks, more fast-food restaurants aspire to elevate their position.

Burger King’s parent company, Restaurant Brands International, is anticipated to release its fourth-quarter financial results on Tuesday.

Pizza Hut will report its financial results on February 23.

A disappointing quarter

Despite the fact that many fast food businesses claimed growth, Chipotle Mexican Grill’s sales were a touch underwhelming.

For the first time in more than ten years, the company’s quarterly profits and sales on Tuesday fell short of Wall Street expectations.

Customers were told by Chipotle’s CEO, Brian Niccol, that there had not been a “meaningful resistance” to the fast-food restaurant’s price increases.

Instead, management at Chipotle provided a list of explanations for its disappointing performance, including:

  • Bad economic weather
  • The underperforming debut of the Garlic Guajillo Steak
  • Challenging comparisons to 2021’s brisket launch
  • Seasonality

Chipotle’s chief financial officer, Jack Hartung, blamed the dip in December on the month’s subpar retail sales.

“As we got around the holidays, we didn’t see that pop, that momentum, that we normally see,” said Hartung.

“Frankly, we started the quarter soft, and we ended the quarter soft.”

Read also: United Airlines among many set for a good year

According to Chipotle, traffic started to go up in January.

The Omicron outbreaks from a year ago, which forced Chipotle and other businesses to either close their doors early or for a small period of time, are easy to compare to, though.

The moderate January weather raised demand across the board for the sector, claims a research note issued by Bank of America analyst Sara Senatore and published on Wednesday.

The fourth quarter financial records for the fast-casual food industry are still unavailable to the general public.

The date of February 16 has already been decided by Shake Shack.

However, the massive fast food restaurant business acknowledged at the beginning of January that its same-store sales growth fell short of Wall Street forecasts.

Portillo’s will report its profits on March 2, while Sweetgreen will do so on February 23.

The casual dining scene

Although the fast-food industry has mostly prospered, fast-casual restaurants have had more difficulties than casual dining establishments.

Casual dining establishments struggle to bring in new clients since Chipotle, Sweetgreen, and Shake Shack have established themselves as preferable alternatives.

Red Lobster and Applebee’s used a variety of strategies, including significant discounts and increased promotional expenditure.

The problem already existed for many restaurant firms, including Brinker International, and the rise in inflation did little more than make it worse.

Chili’s Grill and Bar is now being turned around by the firm.

Brinker said at the beginning of the month that for the three months that concluded on December 28, Chili’s traffic fell 7.6%.

Investors were told on the conference call by Brinker’s CEO and former US President Kevin Hochman that a decline was anticipated as the company attempted to lessen its reliance on unfavorable agreements.

Chili’s increased their prices to discourage customers from using coupons.

Image source: Don’t Waste Your Money

Robots prove clinical to restaurant industry this year

Leah Cooper Leah Cooper on January 2, 2023

Image source: CGTN

Robots: The hospitality industry, and restaurants in particular, have adjusted their strategies to incorporate more technology in recent years.

Recently, more AI has been incorporated into restaurants.

For instance, Chipotle Mexican Grill is testing whether robots can make tortilla chips at some of its branches.

Meanwhile, two Sweetgreen locations intend to automate the creation of their salads.

Starbucks wants to upgrade its coffee-brewing equipment to lighten the workload for its baristas.

The progress so far

In 2022, the restaurant industry announced a number of automation initiatives.

Operators scrambled to find solutions for the diminishing staff and growing wages, which led to the decision.

However, efforts have varied during the course of the year.

It will be years before utilizing robots pays off for businesses or replaces employees, according to experts.

David Henkes, the principal of the restaurant industry analysis firm Technomic, said:

“I think there’s a lot of experimentation that is going to lead us somewhere at some point.”

“But we’re still a very labor intensive, labor-driven industry.”

Early struggles

Prior to the pandemic, hiring and retaining workers was a challenge for restaurants.

Those who were laid off looked for other jobs as the pandemic just made the issue more evident.

The National Restaurant Association reports that a shortage of competent workers prevents three-quarters of restaurants from operating at full capacity.

Although restaurant operators increased pay to entice personnel, the rising cost of food also put pressure on profits.

Automation-focused startups presented themselves as the solution, saying that robots are more dependable than burnt-out humans at completing tasks.

They noted that artificial intelligence allows for more precise drive-thru order entry into computers.

Read also: Tesla’s AI Day introduces Optimus, the company’s first humanoid robot

Automation

Most of the announcements in 2022 came from Miso Robotics, which secured $108 million in November.

They were valued at $523 million, according to Pitchbook.

The company’s most significant invention is a robot named Flippy.

Flippy may be configured to prepare chicken wings and burgers for a monthly rental fee of $3,000.

White Castle promised to install 100 additional Flippy models while renovating four locations.

A new tortilla chip-making robot named Chippy is now being tested by Chipotle Mexican Grill at a site in California.

Miso’s CEO, Mike Bell, stated:

“The highest value benefit that we bring to a restaurant is not to reduce their expenses, but to allow them to sell more and generate a profit.”

Flippy hasn’t been able to go past the testing phase at Buffalo Wild Wings after operating there for more than a year.

Other progress

One of the privately held startups that Inspire Brands claimed it collaborated with to automate the frying of chicken wings is called Miso.

Startup Picnic Works produces equipment for adding cheese, sauce, and other condiments on top of pizza.

A Domino’s franchise is now testing the technology in Berlin.

As a starting point, Picnic Works charges $3,250 per month to hire out its equipment.

CEO Clayton Wood claims that the subscription makes the technology more affordable for smaller businesses.

According to Pitchbook, Picnic Works raised $13.8 million at a $58.8 million valuation.

Panera Bread has been testing automated ordering using AI technologies.

It also has a temperature and volume tracking Miso system to improve the quality of the coffee.

“Automation is one word, and a lot of people go right to robotics and a robot flipping burgers or making fries,” said Panera Bread chief digital officer George Hanson.

“That is not our focus.”

Even with the advancements, success is not guaranteed.

Beginning in 2020, Zume ceased employing robots to prepare, cook, and deliver food.

Instead, the company focused on food packaging.

Labor

Workers and labor advocates frequently criticize employers for eliminating jobs through the use of robots and automation in the workplace.

Meanwhile, restaurant operators have touted their efforts as a way to improve working conditions and eliminate more challenging tasks.

The process of creating salads will be automated at two new Sweetgreen locations that will be built next year using technology created by the startup Spyce.

The new restaurant model, according to Nic Jammet, co-founder and CCO of Sweetgreen, requires fewer workers for shifts.

Jammet noted that lower turnover rates and more employee satisfaction were secondary advantages.

According to Dalhousie University economist Casey Warman, the industry’s penchant for automation will lead to a permanent drop in the number of workers.

“Once the machines are in place, they’re not going to go backwards, especially if there’s large cost savings,” said Warman.

He continued by saying that the pandemic significantly decreased resistance to automation.

In the early stages of the pandemic, customers were accustomed to grocery store self-checkout lanes and relied on mobile apps to make their food orders.

Ball State University assistant professor Dina Zemke studies consumer perceptions of restaurant automation.

Customers were sick of restaurants’ limited hours and slow service, Zemke noted, because of a labor shortage.

In a third-quarter Technomic study, 22% of the owners of more than 500 restaurants said they were investing in equipment that would eliminate the need for kitchen staff.

19% of households also started using labor-saving technologies for ordering.

Read also: TikTok receives ban on government devices

Skepticism

Although there are benefits to automation, it is still uncertain whether there will be any cost savings.

McDonald’s tested order-taking technology for drive-thrus years ago after acquiring the AI startup Apprente.

Months after announcing the test, the fast food giant sold the unit to IBM as part of a collaboration to improve the technology.

In over twenty Illinois test branches, the voice-ordering program’s accuracy was only 80%, falling short of the targeted 95% accuracy.

During an earnings call this summer, McDonald’s CEO Chris Kempczinski discussed automation.

“The idea of robots and all of those things, while it maybe is great for garnering headlines, it’s not practical in the vast majority of restaurants,” said Kempczinski.

“The economics don’t pencil out. You’re not going to see that as a broad-based solution anytime soon.”

However, the potential for automation in trivial tasks is higher.

White Castle vice president Jamie Richardson asserted that innovations like Coca-Cola Freestyle machines had a bigger impact on sales.

“Sometimes the bigger automation investments we make aren’t as earth shattering,” said Richardson.

Reference:

Why restaurant chains are investing in robots and what it means for workers