My review of the first quarter gross domestic product (GDP) results showed several interesting trends and a recent earnings result highlighted one of them -– the weakness in both the restaurant business and spending on eat-outs.

For the first quarter, restaurant expenditure grew by only 4.2 percent, while on the income side food and beverage service activities increased 4.7 percent. While there was growth, the data showed that aggregately eat-out spend and sales were the slowest in the past eight quarters. Looking back even further and excluding the Covid period, this quarter was historically quite weak.

The weakness in spending and sales growth may be reflective of demand becoming more sensitive (or elastic) to price increases. If you examine the restaurant component of the consumer price index (CPI), prices for this inflation component have been accelerating — even ahead of the fuel price hikes.

That is not to say that Filipinos are no longer going out to eat, which is far from the reality, but it may be reflective of consumers becoming more budget conscious. However, when you compare the weakness to 2022-2023 when inflation was also on the rise, eat-out spend is growing close to double-digit levels.

This implies a material change in consumers’ characteristics, particularly with respect to their eat-out preferences. Perhaps in 2022-2023, there was still some pent-up demand for the eat-out experience and benefits from savings during the Covid-19 lockdown. But those tailwind factors may no longer be there.

Meanwhile, a relative of mine sent me his stock summary report for Jollibee Foods Corp. (JFC) to alert me to the sharp decline in the share price and his portfolio. The stock had fallen 14.5 percent on a week-on-week basis last week and closed at P140.60 per share.

The decline was driven by two factors, namely: 1) net profit declined by 38.8 percent year-on-year to P1.47 billion in the first quarter; and 2) the company was downgraded from the MSCI Philippines Index to the MSCI Small Cap Philippines Index.

In principle, I believe Filipinos should try to invest in companies whose products or services are part of their regular consumption basket. Whether it be a utility, bank, property, or consumer company, if you buy its goods or pay for its service, you can have some of the value you gave them returned to you either via capital gains or dividends.

Having said that, I do not frequent Jollibee stores as much as in the past. To be fair, I am probably not the demographic the company is currently targeting. If you use their endorsers of late (Bini, Anne Curtis) and compare that to their current promos (Sarap Savers), you can interpret that Jollibee is targeting Generation Z and Millennials who follow the fandom culture and it is communicating an affordability-focused value positioning. And it is not just Jollibee, as some of its peers are employing similar strategies. This makes total sense, considering this is a growing demographic segment of the consumer market.

However, as the inflation, unemployment, and GDP data suggest, eat-out spending is becoming more budget sensitive. This is probably truer in the younger segment.

Another factor is competition. The barrier to entry for other food service providers, particularly in the chicken and coffee eat-out segments, is quite low as evidenced by the growth in the variety of fried chicken offerings and the proliferation of coffee shops and cafes. The market access accorded by aggregators such as Grab and Food Panda to any food start-up also adds to this competitive landscape.

While scale works for a large player in a high demand growth environment, if the market growth is slowing down, the intensity of competition will likely increase and put pressure on profit margins.

Restaurants and food service providers need to consider making changes to their strategy as tougher times are predicted for the remainder of 2026 and consumers update their spending habits.