Supermarkets, C-Stores Poised to Outpace Restaurant Growth

Supermarkets are on pace to grow twice as fast as the foodservice industry next year, as diners priced out of restaurants shift spending to the prepared food aisle.

The segment is projected to grow 1.8% in 2027, reaching $52.1 billion in consumer spend, double the industry’s overall projected real growth of 0.9%. Meanwhile, convenience stores are forecasted to grow 1.6% and $50.8 billion in spend, according to Datassential’s 2027 Industry Forecast produced in collaboration with IFMA.

Restaurants, meanwhile, are expected to lag. Midscale dining is expected to shrink 0.5%, while casual dining and fine dining post modest gains of 0.5% and 0.8%, respectively, according to IFMA estimates.

Quick-service is forecast to grow 0.8%, below the industry average. Fast casual is projected to lead all restaurant segments in growth over the next few years, though the estimate has been trimmed as lower-income diners pull back and higher-income trade-down traffic fails to offset the loss.

Supermarket prepared departments weathered the COVID-19 pandemic better than restaurants, thanks to the off-premise nature of their business, with roughly three in four prepared-food dollars spent off-premise. A sharpened focus on quality and variety has widened that edge since, pushing average prepared-food checks up 10% year over year, to $19.51 per person. Stores have also built out delivery and online ordering to match restaurant competitors.

C-stores are leaning into food for the same reason: it is a higher-margin category than gas or cigarettes. Newer, larger-format stores are even expanding prepared menus, and loyalty apps now offer curbside pickup and delivery.  Roughly three in four consumers at both c-store and supermarket channels say food offerings factor into where they visit.

Cost is the biggest reason diners hold back from restaurants: 52% of QSR consumers, 52% of midscale diners, 56% of casual dining guests and 59% of fine dining patrons call their segment too expensive By comparison, cost complaints run lower at the retail alternatives: 36% of c-store consumers, 38% of supermarket shoppers call their prepared food too expensive.

Still, diners are not strictly trading restaurants for retail. Across quick service, midscale, casual dining and fine dining, most who cut back are simply eating out less overall rather than shifting their spending to a competing venue. That leaves grocery and convenience channels room to keep gaining without direct restaurant losses.