- When beef prices are high, customers buy more steak at restaurants, Darden's CFO said.
- It's because customers worry about taking a risk if they cook steak at home when it's expensive, he said.
- Beef steak prices rose 8.1% over the past year, much higher than the 1% rise in overall food prices.
Customers worry more about cooking steak at home when it's expensive in case they they mess it up, so they eat it at restaurants instead, Darden Restaurants's CFO said.
"Steak does a little bit better when beef prices are higher just because … the consumer would rather not take a risk on cooking something that's expensive," Raj Vennam told investors at the company's third-quarter earnings call on Thursday.
Darden owns a number of chains including Olive Garden and LongHorn Steakhouse, and it acquired Ruth's Chris Steak House last year. Vennam told investors in September that 22% of Darden's ingredient spending was on beef.
Diners at LongHorn Steakhouse spent an average of $25.50 per meal in the 2023 fiscal year, though prices vary massively by location. At a restaurant in California, its cheapest steak – a six-ounce cut of renegade sirloin – costs $18 with a salad and side if you collect it yourself, while a restaurant in Mississippi charges $14 for the same meal.
At Darden's upmarket seafood restaurant and steakhouse Eddie V's, where diners spend an average of $114.50 per meal, its cheapest steak — a 10-ounce center-cut filet mignon — costs $58 for pickup, excluding any sides.
The price of uncooked beef steaks from grocery stores went up 8.1% in the year to February, much higher than the 1% rise in overall food prices, according to data from the Bureau of Labor Statistics' consumer price index.
In fact, the only other groceries whose prices rose at a higher rate than beef were uncooked beef roasts, baby food and formula, and frozen non-carbonated juices and drinks, the latter of which only makes up a minuscule proportion of spending on groceries.
According to BLS' producer price index, which measures wholesale inflation and how much producers get for their goods, beef and veal prices rose 14.6% in the year to February 2023.
The cost of dining out has risen much more than grocery prices over the past year, BLS data shows. In particular, diners have complained that fast food no longer represents good value.