WHAT'S ON THE MENU? Seven Predictions About the Food & Beverage Industry.

• Author: McMillan, Kathleen
• Position: UB VOICES

The U.S. food and beverage (F&B) industry is substantial; nearly a quarter of every retail dollar spent in the U.S. in 2018 was on F&B. But how and where consumers spend their F&B dollars has changed significantly over the past 20 years. CBRE has developed a four-part series of F&B research reports that dive into the details of Americans' F&B spending habits, the first of which was released at the end of April and focuses on consumers. To align with the shift that's occurring in this sector, seven key predictions based on consumer data analysis were highlighted in the report. Here is what we can expect in the future F&B industry, along with some of the real estate implications of each.

1. BRICK-AND-MORTAR F&B SPENDING WILL CONTINUE TO OUTPACE MORE TRADITIONAL RETAIL CATEGORIES OVER THE NEXT FIVE YEARS.

   $1.5 trillion was spent on F&B in 2018, accounting for 24.2% of total retail sales, and the industry is much more resilient than other retail categories. The rise of F&B's share of total retail sales in the pre-recession period (2000 to 2008) to post-recession (2009-2018) was 22.7% vs. 24.3%--relatively flat. As a comparison, the drop in non-F&B retail sales at the height of the recession (2009) was 9%. Since 2000, F&B spending growth rates have been less volatile than overall sales growth rates.

2. GROCERS WILL DEVOTE MORE SPACE TO PREPARED FOODS TO CAPTURE SHIFTING CONSUMER DEMAND.

   Consumer spending is shifting from grocery stores to restaurants; the share of F&B dollars consumers spent at restaurants exceeded that of grocery stores for the first time in 2016. Lower prices at grocery stores, higher prices at restaurants, demographics and lifestyle changes, and new lower-priced restaurant segments--coined fast casual--all contributed to this shift. This shift also reflects a change toward convenience. Many, especially millennials, want to spend less time cooking and eating; this is giving rise to delis, carry-outs and fast-food chains, and presents grocers with an opportunity to shift their attention to prepared meals, in-store bars and restaurants.

3. RESTAURANTS WILL INCREASE INVESTMENT IN TECHNOLOGY--ESPECIALLY DATA AND AUTOMATION--TO CONTROL RISING COSTS AND LIMIT CONSUMER PRICE HIKES.

   Most retail categories have experienced price declines that have been driven by supply-chain efficiencies, but this phenomenon has yet to hit the restaurant industry. To address these rising costs and limit consumer price hikes, most major restaurant chains...