Weekly Wrap October 13: Beef Prices, Gen Z Restaurant Spending, and More

The latest U.S. Consumer Price Index data shows the average price of ground beef was $6.31 per pound in August, increasing by 76 cents since January. Steak has also increased considerably this year, averaging $12.22 per pound, a steep rise from January’s price of $10.91.

The reason for the record-high prices, producers say, is multifactorial. 

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Beef producers in Oklahoma and throughout the Midwest have faced persistent drought conditions that predate the COVID-19 pandemic. Oklahoma and Texas, the top beef-producing states in the nation, according to the USDA, experienced a pronounced drought in 2021. This has caused the U.S. beef cattle herd to shrink to its lowest levels in more than 70 years, said Michael Kelsey, executive vice president of the Oklahoma Cattlemen's Association.

Smaller herds means fewer calves, which creates a supply and demand issue, he said. 

“It takes a while to breed the cow, get the calf born and raise it to be old enough to be a beef-producing animal,” Kelsey said. “As producers, not only in Oklahoma, but across the country, we’re going to have to start keeping [more] heifers to produce more calves, and that just takes time.”

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Inflation is another factor. Sale prices are high, but so are input costs for beef producers like Randy Zabel, owner of Zabel Cattle Company in western Oklahoma. He said between inflation, interest rates and low herds, the average family beef producer is “squeezing a three-prong vice.”

“Costs have gone up significantly,” Zabel said. “The preventative measures that you have to [take] for a calf when you’re weaning has more than doubled in the last five years. Costs on things like fertilizer, diesel fuel, any herbicide or pesticides you may be using, have gone up a minimum of 35-40%.

Who is that next generation? Gen Z, mostly, or those between the ages of 13 and 28. Gen Z’s spending power is expected to reach approximately $12.6 trillion by 2030, which would make these consumers the most economically influential generation in history. There is a reason brands are ramping up their marketing campaigns to appeal to this group. Chipotle just launched a rewards program specifically for college students, for example.

Indeed, future proofing is necessary, but it’s also a tough task in this environment as younger consumers are among the most impacted by macroeconomic volatility and they’re pulling back their spending significantly.

New research from TD Cowen finds that younger consumers are under more pressure than the average consumer, alongside low-income consumers, liberal consumers, and Hispanic consumers.

Piper Sandler’s newly released, semi-annual Taking Stock with Teens survey shows that teens’ annual spending has declined by 6% year-over-year and is 1% below the average spending levels from the past 10 years.

Gen Z spending weakness has major implications for the restaurant industry. The cohort recently surpassed millennials as the most frequent restaurant users, according to Technomic.

Their pullback is especially impacting the fast-casual segment, according to TD Cowen. The demographic overindexes with the fast-casual category, which is now experiencing a 28% decline in valuation versus its five-year average.

Cotton Patch Cafe had been struggling for years when CEO Brandon Coleman arrived last February.

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Coleman found a brand, he said, that had lost sight of its customers, its employees, and its shareholders at private-equity firm Altamont Capital Partners, which acquired Cotton Patch in 2016.

Previous management had raised prices significantly against inflation, damaging the chain’s reputation for value. They had “watered down” the brand with unnecessary menu innovation and marketing moonshots. Internally, morale was low. One former leader fired two-thirds of the management team, Coleman said; another “didn’t build people up.”

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Eighteen months later, it’s a completely different story. Since Coleman took over, Cotton Patch has jumped from the basement of Black Box Intelligence’s traffic index to the 93rd percentile. Earnings have increased tenfold. And the chain is ready to start opening new restaurants again, with ambitions of doubling its footprint in Texas alone.

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Cotton Patch’s guiding principle under Coleman has been to find strategies that will benefit its three key stakeholders: employees, customers and shareholders.

To do that, it has used a simple traffic-light system. Each initiative is assigned a rating of red, green or yellow for each stakeholder group. Green is good, yellow is acceptable. “We take no reds,” Coleman said.

But among that group, employees were the company’s first and biggest priority. It worked to sweeten its employment proposition, raising manager pay across the board and adding more benefits, like a 401(k) option, tuition assistance and a profit-sharing program.

Sometimes, becoming a bartender can be the impetus that fully changes their perspective on their condition. As a boy in the 1990s, Tony Jimenez was diagnosed with ADHD and was put in a fog of school-administered meds intended to control his behavior. “By the 6th grade, I was on 5 to 6 grams of Ritalin and antidepressants,” says Jimenez, who tends bar at 1 Tippling Place and Almanac in Philadelphia. “This was before I hit puberty.”

The experience left him with a negative view of his neurodivergence. When he pivoted to bartending after growing tired of the rigidity of a university job he was working, his perspective on his condition followed suit. “I used to feel ashamed of my neurodivergence. Now I feel empowered by it,” he says. “I see it as a superpower because of the industry I’m in.”

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Often, the ability to think differently translates into seeing things differently. This is particularly true regarding how neurodivergent bartenders directly interact with guests. The unique skills that may exist in their arsenal, such as an elevated attention to detail or an advanced ability to recognize patterns, may lead them to catch subtle clues in a guest’s behavior that signify a need to interact in a certain way. Some neurodivergent individuals may also have a heightened sense of empathy or social justice, a trait that could come from an intensified focus on rules and their impact. This could allow them to forge deeper connections with a guest quickly. “You can start to read people just by introducing yourself,” explains Julie Baetiong, consulting partner for Lemon in Chicago. “This is true regardless of where you’re at, from a bar at a fine-dining establishment to a dive.”

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While the bar industry presents a terrific place for neurodivergent folks to land, it’s far from perfect. Several misconceptions about how they function abound within the industry: They can’t interact with people. They’re difficult to train. They can’t handle situations outside normal given tasks. These falsehoods can interfere with a neurodivergent bartender’s work life and potential career growth.

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There’s been a significant increase in understanding neurodivergent conditions over the past several years thanks to improved access to data and better diagnostic procedures. This rise in knowledge generally coincides with a decrease in the stigma that surrounded conditions like ADHD and ASD in the past. Unfortunately, this dynamic hasn’t sufficiently trickled down into the hospitality industry, and bar owners and managers who ignore the needs of neurodivergent staff or remain rigid on how tasks should be completed could inadvertently create an environment ranging from unwelcome to hostile.