Let’s keep this between us, since the restaurant industry doesn’t need a public scolding for raising menu prices to their current levels. Accusations of price gouging have so far been focused on the grocery business, to the point where the federal government is considering a crackdown, whatever form that might take. Call us cynics, but it likely won’t be a good thing for supermarkets regardless of the particulars.
Sticker shock on Aisle 9 has even become a presidential campaign issue, with the candidates from both major parties striving to show their outrage over the high cost of Cheerios. Third-party candidate Robert Kennedy has been mute on the issue, probably because his roadkill diet spares him from regularly shopping at Piggly Wiggly.
But the foodservice business should be aware of its vulnerability on the matter, a risk posed by more than just the nosebleed level of menu prices.
Two of the politicians demanding explanations for the current level of supermarket prices have focused on what appears to be a relatively new dynamic for the retail food business, the use of digital price tags. Essentially, big chains like Kroger are switching to what amount to mini-monitors displaying an item’s price. Known as Electronic Shelving Labels, or ESLs, the devices enable a grocer to change prices with a few keystrokes, instead of requiring that merchandise be manually retagged with a printed depiction of the price.
Sounds like one of the oft-cited advantages of digital menu boards, doesn’t it?
The retail trend was blasted last week by Sens. Elizabeth Warren (D-Massachusetts) and Bob Casey (D-Pennsylvania) as a convenient way for supermarkets to adopt surge pricing. In a letter to The Kroger Co. CEO Rodney McMullen, the politicians raised concerns that the ease of changing prices will lead Kroger to instantly hike prices if it detects an uptick in demand for a product.
“The price of basic household goods could surge based on the time of day, the weather, or other transitory events – allowing stores to calibrate price increases to extract maximum profits,” they wrote, equating the practice with price gouging.
They cited the examples of turkey prices climbing in the lead-up to Thanksgiving, or stores charging more for ice cream during the dog days of summer.
The letter notes that use of ESLs in supermarkets is increasing at a rapid clip. About 500 of Kroger’s 3,000 stores currently use the technology, and Walmart has pledged to adopt it at 2,300 of its branches. Schnucks intends to add another 115 stores to the total.
If there’s a tally of how many fast-food restaurants are now using digital menus, we’ve yet to see it. But is there any doubt the number is exponentially higher than the nosecount of grocers using digital pricing? McDonald’s alone probably sports more screens with easily adjustable menu prices, whether at the drive-thru or inside on kiosks and overhead menu boards.
The capability feared by Warren and Casey is already widespread in the restaurant business. How long before they or other public watchdogs notice?
Plus, dynamic pricing has been a stated quest of the business for several years now, or likely since Uber demonstrated its feasibility and positives. Some chains are already altering prices to reflect demand, though the adjustments are usually decreases intended to bolster traffic during slow times, not increases to capture more revenue when demand peaks. It’s the Happy Hour approach, not the price hiking travelers see from hotels or airlines when vacant rooms are scarce.
Fortunately, groceries are seen as essential while restaurant meals are still viewed by many as treats. Saying something has to be done about menu prices can come off as elitist, like complaining about the prices Mercedes-Benz dealers are charging these days.
But the potential for scrutiny is there. So mum’s the word. And be ready to blame robots if any public figure questions why restaurant prices are so high.