While eating out is generally more expensive than eating out at home, going to a restaurant can be a relative bargain compared to the higher grocery store prices.
Restaurant prices have also risen, but they have risen at a slower pace. Analysts at Wells Fargo noted in a report that the cost of food at restaurants and other vendors is 5.8% compared to food at grocery stores or supermarkets, rising nearly 10% from November 2021 to August 2022.
Thanksgiving-specific foods — which include eggs, flour and fruits and vegetables — are even more expensive than those bought at stores, up 14.9% over that time, according to the report, which was based on Consumer Price Index data.
“The CPI is basically telling us that inflation at the grocery store costs more than eating out,” Brad Rubin, a Wells Fargo specialty crop analyst, told CBS MoneyWatch.
Why is groceries so expensive?
Rising commodity costs affect food prices more directly at grocery stores than at restaurants because the latter also affect overhead and labor costs in their menu prices. In other words, commodity ingredients make up a small percentage of the restaurant’s total cost.
As commodity prices rise and fall, grocery prices also fluctuate rapidly.
“They’re selling to consumers and if the supply is short, their costs go up and they need to make a profit margin,” Rubin said.
In contrast, restaurants buy food inputs in bulk and generally do not need to or rapidly increase consumer prices.
Given that some Thanksgiving dishes will cost almost as much at a restaurant as it would be to prepare them at home, some Americans may skip the hassle of hosting an annual feast and dine out instead.
“If you’re a family of four and you have to prepare and buy items associated with that Thanksgiving meal, it might actually benefit you to go out to eat — it’ll be a similar price,” Rubin said. “It’s considered a luxury to some, and there’s a lot of value in eating out this year.”
According to a Bank of America research note, restaurants eventually increase prices to cover price shocks, which could widen the gap between the cost of eating at home versus the cost of eating out in 2023. In other words, the time to make the most of eating out is now.
Bad weather led to crop shortfall this year, which pushed up the price of potatoes, onions, celery and carrots. Cranberry sauce — a Thanksgiving staple — will cost even more this year.
In its October report, the United States Department of Agriculture (USDA) warned of potential turkey shortages following an outbreak of bird flu that wiped out producers’ supplies. The main menu item for Thanksgiving – turkey – is expected to cost 23% more than last year.
As inflation continues to haunt consumers, some retailers across the country are cutting their prices for Thanksgiving foods. Walmart said last week that it is keeping traditional holiday foods including ham, potatoes, stuffing, cranberry sauce, mac and cheese, and pumpkin pie at last year’s prices. According to the retailer, it’s selling whole turkeys for about half the national average.
And discount giant Aldi last week started offering sales of up to 30% off holiday favorites at its 2,200 stores in 38 states, saying it will offer items like Brie cheese, prosciutto, cornbread stuffing, rolls and apple pie. But will match 2019 prices.