US Foodservice: Expect an Even Bigger Lift From the Third Stimulus

This is the first in a series of reports using Earnest Research data to evaluate the potential impact of the third stimulus checks on consumer foods. This note focuses on foodservice spending, with the next one to focus on food retail. A deep look at credit/debit card spending data shows two clear ’peaks‘ over the last 12 months, as restaurants received a short-term lift from the last two stimulus payments. We believe that the third round of stimulus could provide an even bigger, and perhaps a more uniformly distributed, sales benefit to restaurants over the next several weeks, likely building a bridge to a more comprehensive sales recovery as Covid vaccinations speed up.

Third Time’s a Charm

Checks under the USD 1.9 trillion American Rescue Plan, the third and largest stimulus package since the pandemic outbreak, began rolling out mid-March. The US government expects nearly 85% of all US residents – adults, children, seniors – to receive direct payments of up to USD 1,400 based on household income. The ongoing stimulus is substantially higher than the last two in April and December 2020, which included direct payments of USD 1,200 (plus USD 500 per child) and USD 600 (plus USD 600 per child), respectively. 

Recipients Spent 10% to 15% More in Restaurants Following the Last Two Rounds of Stimulus

Credit/debit card transaction data from Earnest Research, a data analytics firm that tracks the US consumer economy through foot traffic, credit/debit card spend, retail pricing, and healthcare data, shows a sharp, short-term spending lift from the last two stimulus payments. During the four week periods immediately after stimulus payments were made, restaurant spending for those who did not receive any stimulus were 10% to 15% below the overall category. However, a deeper look reveals that the level of ‘stimulus lift’ diverged significantly across various subsegments. Delivery aggregators were a clear winner, along with restaurants with a lower average check and well-built off-premise capabilities. Specifically:

ŸDelivery aggregators’ outperformance became even more stark around stimulus payments, as delivery sales growth for stimulus recipients exceeded overall delivery growth by 24 to 50 percentage points (pp) during the first stimulus and roughly 20 to 40 pp during the second.  

ŸQSRs and fast-casual restaurants, which are more adept at delivery/takeout/drive-thru and have lower average menu prices, also saw a significant boost from stimulus payments, scoring a high single to low double-digit sales lift in the two stimulus rounds.

ŸIn contrast, stimulus-driven sales trends for fine and casual dining restaurants were relatively mixed. Both formats showed no perceptible lift from the first stimulus, likely due to closures, fewer off-premise options, and different income audience. While both received a bit more lift from the second stimulus as dining rooms reopened, it wasn’t as prominent as it was for most limited-service restaurants. 

Fig 1_US foodservice stimulus
Fig 2_US foodservice stimulus

Interestingly, the impact from stimulus also varied based on cuisine. Pizza, Mexican, chicken, and burger restaurants showed a 6 to 16 pp lift immediately after stimulus. The evidence was less convincing for diners, Italian restaurants, as well as those with a varied menu, likely reflecting lower off-premise exposure compared to the other cohort.

Fig 3_US foodservice stimulus
Fig 4_US foodservice stimulus

We Expect an Even Bigger and More Uniform Impact From the Third Round of Stimulus

The sales growth delta between the overall category and those who are not receiving the USD 1,400 stimulus checks could rise to 20% to 30% over the next several weeks well-above the low double-digit delta from the last two rounds of stimulus, given:

ŸMuch larger direct payments under the current stimulus to more residents and higher per capita payments to children and senior citizens – the federal government estimates nearly USD 411bn in direct payments, roughly equal to the previous two stimulus programs combined. Moreover, the current stimulus also includes larger indirect benefits, such as expanded unemployment benefits, wider eviction protection, increased SNAP benefits, and greater assistance to small businesses (including USD 29bn for restaurants).

ŸAn improved economic scenario, with 12m jobs added since last April and record-high discretionary income. The US consumer is likely in better financial shape and more keen to spend their checks on non-durable discretionary items, including restaurants.

ŸWider availability of restaurants, particularly dine-in options compared to last year, as most states continue to scale down Covid-driven restrictions with a steady decline in Covid cases and accelerating vaccine rollout.

ŸGreater eating-out and traveling opportunities as spring flourishes and weather warms up (as opposed to the second stimulus, which was followed by harsh winter storms in large parts of the country).

Fig 5_US foodservice stimulus