trend reversals

The government shutdown means that all the government databases are unavailable.  That’s good news for me   …and bad.  It means I can’t get precise data.  On the other hand, I feel justified in winging it.

I’ve been thinking a lot lately about Millennials vs. Baby Boomers, probably because I’m one and my kids are the other.  I’ve also been thinking about trend reversals, mostly because I believe we’re in a time when a lot of this is happening.  There are always to make money from recognizing trend reversals early.

restaurants vs. supermarkets

I remember seeing a piece of truly excellent sell-side research about ten years ago that documented the changes in American eating habits over a 30-40-year period.  The essence was that through good times and bad Americans were spending an ever-increasing proportion of their food budgets on meals away from home (eating in restaurants + take out).  Not only that, but the extra expense of restaurant meals vs. home cooking had been on a steady decline from, say, a 40% premium over cooking at home two decades earlier to 20% at the time of the report.

The conclusion:  a MEGATREND favoring restaurants over supermarkets (which were having competitive problems with Wal-Mart, anyway).  At that time, home cooking represented just over half of what consumers were spending on food.  The restaurant share was inching up by 0.5% – 1.0% annually.  NO END IN SIGHT!

Well, the Great Recession has changed that.  Over the past few years, eating out has been falling as a percentage of consumer spending on food.

Details:

–everyone outside the top 20% by income has cut back on restaurants a lot in order to save money– and by enough to derail the long-lasting pro-restaurant trend

–Millennials have not only cut back, but they’ve aggressively traded down to less expensive eateries

–seventy-somethings have changed their behavior the least

I think there are two related reasons for the cutback:

–what economists call a substitution effect, as consumers rejigger their spending to maintain, or enhance, their lifestyles in a world without pay increases and where interest rates are ultra-low, and

–workers realize they can’t get sick if they want to retain their jobs, so they’re eating healthier.

I’m not sure how much of this is already baked in the stock price cake, as it were.  But I think it’s worth taking a look at eat-at-home beneficiaries to check.