Priced Out Of Pizza - The New Economic Reality…

For the longest time, pizza has been the go-to dinner for families on the move and people who just need something fast to eat. And traditionally, it always has been pretty cheap, just like fast food. And now that frozen pizza even is becoming a luxury in today's economy, this is something we need to do a double take on and actually look at and start to take a step back and think, are things really going as well as we're being told? Because clearly, when something like frozen pizza is now a luxury, we need to start reconsidering what luxury is. And by the way, this is my wife, Lizzie, who's walking with me today. Now, at the beginning of the year, I did a video talking about how Domino's, which is the largest and most successful pizza company in America, was seeing struggles and seeing their pizza sales go down. Well, now fast forward to the middle of the year, it is all different types of pizza sales from all different companies that's going down. It's no longer just Domino's. In fact, the pizza sales are starting to fall like Domino's. And back in 2020, when we had the pandemic, places like Domino's and Papa John's, these big pizza chains, were seeing double digit year over year sales increases at their stores, but that is no longer the case. Five years later, people are being priced out of eating pizza. And I think this is important to talk about because I never once thought about pizza being a luxury when I was a kid growing up or even fast forward to today, being a grown man, that never crossed my mind. You know, that's something that they buy for a cheap meal at birthday parties or family looking to feed, you know, six or seven people. We're getting a pizza because it's, you know, cheap for the amount of people it can feed, so to speak. But five years later now, same store sales are down at all three pizza chains. We're talking the big ones like Pizza Hut, Papa John's and Domino's. In fact, Pizza Hut saw a 5% reduction in year over year sales. Papa John's is down 2.7% and Domino's is down 0.5%. And if you take a look at this chart here, you can see going back to the pandemic, how much the pizza sales were up and just how much they have sunken since then. Now, part of the problem could be that there are just so many choices and we have all these food delivery apps now like Grubhub and Uber Eats. In fact, I talked about a couple of months ago how Grubhub partnered up with Klarna and you can even do buy now, pay later to order stuff from Klarna. So you can get luxury fast food essentially delivered to your house and not even pay for it. You can pay in four installments if you want to. There's a lot more choices than just pizza nowadays. But the biggest factor contributing to the downward spiral in sales at the pizza chains is the same thing that we're seeing happen with McDonald's and a lot of the fast food chains. It is the low income consumer and those are the people who account for the majority of the sales at these pizza chains who no longer see the value in the product because it's no longer cheap. They used to be able to get these things pretty cheap. Probably Domino's is still the cheapest one out of all three and that's probably why their sales are only down 0.5% year over year versus 5% at Pizza Hut. Right now the average price of a large pizza at the top five chains is now $18.14 and the average check, the average invoice at these companies has gone up 30% since 2019. So takeout at these pizza joints has gone up considerably and that 30% increase is actually a little bit higher than the increase that we've seen at burger and chicken chain restaurants. It depends on the item though because some items have gone up 200% in price at McDonald's for example but overall the average is still a little bit higher for pizza. And part of the reason pizza is getting more expensive is because the ingredients costs have also gone up considerably. And if you take a look at this chart right here, this shows you how much pizza has gone up compared to all these other food groups. The only thing that even comes close are hot sandwiches and chicken tenders but you go down the list like cold sandwiches or beef entrees, pork entrees, rice entrees, hot dogs, those have only gone up a few percentage points in a year but the pizza 12% in one year. Now of course all these pizza chains are trying to use their rewards programs to get people to come in more often. They'll usually give you a free pizza after ordering a few times and the story at the supermarket for frozen pizza is pretty similar. And right now these frozen pizzas for example something like a tombstone, that's what we used to buy all the time at the grocery store when I was a kid, the tombstone. It's such a funny name also because tombstone you know the pizza and then maybe that leads you to the grave in the end. But anyways those pizzas now range between four and six dollars and I remember when I was a kid they used to have sales on those where you could get like 10 of them for like 15 bucks like no joke. And nowadays you know now you're paying four to six dollars for just one of them and so surprise surprise they're not selling as many of them as they used to. And now it's to the point where the frozen pizza makers actually have to lower the prices to try to get people to buy it again. So the frozen pizza sales are kind of in the same situation where McDonald's and the fast food sales have been for a while now where you're already looking at a cheap product that needs to be lowered down in price even further just to get the sales back to where they were before the pandemic. And interestingly enough on the flip side on the luxury side of things like in New York City if you go to a high-end pizzeria right now you could be paying anywhere between $30 to $58 for a pizza at one of these luxury pizzerias. And of course people who are doing well they don't care they're willing to pay more because they're made out of higher quality real ingredients nothing like a tombstone. And of course a lot of those ingredients are imported and now we have the tariffs so a lot of that stuff comes from Italy. So guess what the ingredient costs have gone up. In fact they talked to one of the food importers who imports a lot of these ingredients from Italy and he says his costs have basically jumped 20% overnight thanks to the tariffs. And that's a perfect example right there that if you want to eat a luxury pizza from Italy you are going to be paying that extra price because you better believe the manufacturers and the importers and the restaurants are going to be passing most of that cost along to you the consumer. Even this guy says we have no choice but to pass along these costs to the consumer but it's not like it goes up by 20%. They do eat some of the costs because he expects these pizza restaurants to raise their prices anywhere between two and five percent based on the food costs alone. So in the end it's probably going to be more like 10 to 15 percent when you throw in the labor costs as well. So I think the pizza sales is actually a great way to measure the real economy you know forgetting about the GDP and the jobs numbers and all this noise and nonsense that usually is all doctored to the point where the information is useless anyways because it shows what real people are doing. Real people are spending less money on things that used to be something that everybody could afford and enjoy and now it's becoming something more of a luxury item which is pretty sad if you ask me. Or it just could mean that people are getting smarter with their money as well maybe they're seeing more videos like these I just got hit in the head with the balloon. Maybe they're seeing more videos like these and they are choosing not to spend the money on pizza. Maybe they're making more food at home. I see a lot of people in the comments say that's what they're doing now and you guys are saving hundreds of dollars a month which is very smart. So that could just be it instead maybe people are finally wisening up and not falling for all of this terrible fast food that is just not only not good for you but it's not good for your wallet. Now switching gears a little bit here there was a story that came out a few days ago from the Federal Reserve Bank of New York in San Francisco and they did a study what happens if interest rates return back to zero meaning if the Fed were to lower its benchmark rate essentially down to zero where it was during the pandemic. Well according to their data they think there's about a nine percent chance that the United States could actually lower its benchmark interest rates to zero percent by the year 2032. That's similar to what the markets were pricing in back in 2018 and it turns out that the probability of this happening rises substantially when there's a lot of economic uncertainty like what we have right now. Now I don't know how I feel about this because on the one hand I don't put anything past these guys. I think anything is possible. I think that they could definitely lower rates back to zero percent at some point if the economy gets to a bad enough place because obviously they did that during the pandemic. But I don't know if they will do it simply because of inflation. They haven't been able to get inflation under control even at the interest rates that we have set right now which I think is in the mid fours. They might not even lower interest rates at all anymore for the rest of the year and if they do inflation is guaranteed to go back up. So imagine what would happen to inflation if they decided to actually lower rates to zero again at some point in the future. Things wouldn't be looking so good for anybody. Yeah it'd be great if you want to borrow money to go buy something but guess what the cost of that item is probably going to be astronomical now so you're gonna have to borrow way more because of the inflation. And there's also some evidence showing that prices on certain items are starting to rise now because of the tariffs. You know a lot of the tariffs were supposed to go into effect now in July the ones that were on the 90-day pause and some of them have been shifted towards you know August. We're going to wait one more month and let's see if the tariffs are actually going to go into effect. We'll see right but in the meantime let's take a look at what's actually happening right now. Some companies and some businesses of course are eating some of the costs. That's the reality because you know people are already kind of maxed out and these businesses know that so they're choosing to take a small hit in the meantime rather than raise prices in some cases. But a recent study from Goldman Sachs shows that businesses are only absorbing about 20 percent of the cost of the tariffs and they're still passing along the other 80 percent of the cost to consumers. So the reason why we also haven't seen prices jump up so dramatically once these tariffs were announced is because a lot of inventory for the things that tariffs were supposed to affect got front-loaded and a lot of inventory was already imported into the United States before these tariffs were even announced or even if it was after if the goods were already on a ship to America then they're exempt. And ultimately this is probably going to lead to a lot of businesses going under and probably more layoffs into the future because businesses either have two choices. They can either charge customers more and see their sales go down or they can eat more of those costs and keep their sales the same or maybe even increase them in the short term but with a lower profit margin which means less room for growth and less room to pay more employees which means we can't afford to have as many people working here anymore which is layoffs. So either one of these scenarios isn't that great in the long run for American businesses. According to the May consumer price index it shows that several tariff sensitive categories saw price increases. The price of appliances went up 0.8 percent, toy prices climbed 1.3 percent and household furnishings tools and sporting goods showed acceleration in price hikes as well. The perfect example here is to look at toy prices and see how much that's gone up. For example toys at Walmart and Target are up 7.4 percent and 6.1 percent respectively and you know you could just say well maybe the kids just don't need as many toys and I would probably agree with that you know they don't need to have everything right and a lot of that stuff is just made in China garbage anyways no one really needs that stuff it's just a want and kids can still be happy with fewer toys and as long as they're entertained and have things to do they don't need to have a hundred toys but the worrying part is on the other things it's on goods and things that businesses actually need to operate like when we're talking about lumber prices going up making it more expensive for homeowners insurance making it more expensive for home builders when we see the price of metals go up you know hard goods that we actually need to manufacture products here in the United States and we're supposed to see the new CPI report coming out soon and we'll have to take a look at that and see if the tariffs have had a noticeable impact on it but even if not it's almost a guarantee that we will see a more noticeable impact on prices in the near future over the next several readings. Wells Fargo is expecting the overall CPI to peak at 2.9 percent later this year and inflation continuing to go up is not going to be a good thing in this economy and we already know that people are hurting because when we look at what's going on in a couple of American cities Spokane and Seattle Washington these two cities are both in the top five cities where credit card delinquencies are increasing the most right now according to WalletPub delinquent credit cards accounts increased by 15 percent in Seattle from the first quarter of 2024 to the first quarter of 2025. Seattle also came in as the third worst city for timely credit card payments while Spokane Washington was fourth and essentially any increase in credit card delinquency is a sign of growing stress in a certain area so that means you're seeing a lot of financial distress in these cities in Washington and it's all over the country but these are the areas that are seeing the delinquencies rise the most. One last thing I want to mention is Donald Trump has been consistently pressuring Jerome Powell and the Fed to lower interest rates he wants interest rates essentially to go down to zero that would be great for him because it would make things look good for a little while in the economy it would goose spending once again at least temporarily until people couldn't afford anything anymore the problem is though is that the Fed is sort of committed to keeping rates the same for the foreseeable future they've said that repeatedly and the only thing that's going to change that is if we get rid of the tariffs but now the problem is we've already committed to this tariff situation and we'll have to see how things shape up in August if all these tariffs end up being actually in place and permanent because if they are there's going to be pretty much no chance of the Fed lowering interest rates in 2025 because these tariffs are going to have inflationary pressures on goods and services in America and so the irony is here is that the more we go down this road of trying to impose tariffs on other countries then the less likely we're actually going to see interest rates come down at all maybe we'll even have to see them go up if it actually increases inflation to a noticeable degree so the way things stand right now it's not looking very good on the future of prices for just about anything except for maybe home prices and car prices because those are already starting to come down but as far as everyday goods and services that people buy like pizza going back to the beginning it's not looking good at all those things are likely to just get more expensive as inflation continues to be a problem and if the tariffs continue to be permanent so we'll keep an eye on all of this and if you enjoyed this video make sure you subscribe to the channel and if you don't want to wait for my next video to come out check out this one on the