Investment Opportunities in Food-Away-From-Home as Tariffs and Inflation Reshape Consumer Discretionary Sectors

The interplay of tariffs and inflation in 2025–2026 has created a complex landscape for consumer discretionary sectors, particularly in food-away-from-home (FAFH). As the U.S. economy navigates the fallout of Trump-era tariffs and moderating inflation, asymmetric opportunities are emerging for investors. This analysis examines how shifting price trends, policy adjustments, and evolving consumer behavior are reshaping the dining-out versus at-home consumption divide-and why FAFH remains a compelling long-term investment target.

Tariffs: A Double-Edged Sword for Food Service

The 2025–2026 tariff regime has significantly elevated input costs for the foodservice industry. According to the Harvard Business School (HBS) Pricing Lab, imported goods saw a 4.0% price surge between March and September 2025, while domestic goods rose by 2.0% according to a report. For restaurants, this translates to higher costs for critical ingredients like specialty cheeses and seafood, which are essential for maintaining menu variety and quality as data shows. The ripple effects extend beyond direct costs: supply chain disruptions have reduced ingredient availability, squeezing profit margins for operators already working on thin margins as noted in industry analysis.

Yet, tariffs are not uniformly detrimental. The St. Louis Fed estimates that tariffs contributed 0.5 percentage points to headline PCE inflation and 0.4 percentage points to core PCE inflation during June–August 2025 according to economic data. While this underscores inflationary pressures, it also signals a structural shift in pricing power. Restaurants, particularly those with brand equity or unique value propositions, have demonstrated an ability to pass on costs to consumers. The U.S. Department of Agriculture's Economic Research Service (ERS) forecasts a 3.9% increase in FAFH prices for 2025, with a 3.3% rise expected in 2026 as reported in their outlook. This suggests that while tariffs have raised costs, they have also created a pricing environment where premiumization and menu engineering can thrive.

Inflation Moderation and Consumer Behavior: A Tale of Two Sectors

Despite persistent inflation, consumer behavior in 2025–2026 reveals a nuanced picture. FAFH spending has outpaced food-at-home (FAH) consumption, with 55% of households' food dollars allocated to dining out, takeout, or delivery in 2025-a trend consistent since 2023 according to consumer research. This preference is driven by the experiential value of dining out: 66% of consumers cite "atmosphere" as a primary reason for choosing restaurants as findings indicate, while 52% associate dining out with socializing as data shows.

However, inflation has introduced asymmetry. FAFH prices rose 3.9% year-over-year in 2025, compared to 2.7% for groceries as reported by Trading Economics. Consumers, paradoxically, perceive grocery inflation as higher than it is-a 4 percentage point gap between actual and perceived FAH inflation in 2024 as noted in industry analysis. This misperception has not deterred dining-out frequency. In 2024, the average consumer dined out 5 times per month, up from 3 in 2023, with average monthly spending rising to $191 per person according to consumer trends. This resilience suggests that consumers are prioritizing discretionary experiences even as prices climb.

Strategic Positioning for 2026: Asymmetric Opportunities in FAFH

The confluence of tariffs, inflation, and consumer behavior creates a fertile ground for FAFH investment. Three key opportunities stand out:

1. Premiumization and Experience-Driven Dining: As tariffs elevate input costs, restaurants with strong brand equity can leverage premium pricing. For example, fine-dining establishments or niche concepts (e.g., plant-based, global cuisines) can justify higher menu prices by emphasizing quality and uniqueness. The HBS Pricing Lab notes that reduced competition from foreign imports has allowed domestic producers to consolidate market share as data shows, a dynamic that can be mirrored in the restaurant sector.

2. Supply Chain Adaptation: While tariffs have disrupted sourcing, they have also spurred innovation. The recent rollback of tariffs on key food imports and fertilizers as reported by industry sources offers short-term relief, but long-term success will depend on operators' ability to diversify suppliers or adopt alternative ingredients. For instance, restaurants sourcing from domestic producers or leveraging technology for inventory optimization may outperform peers.

3. Consumer-Centric Pricing Strategies: The National Restaurant Association forecasts a 3.0% CPI increase in 2025 according to economic research, but this does not preclude creative pricing. Subscription models, loyalty programs, and value-based bundles can mitigate price sensitivity. For example, offering "dine-in-only" discounts or pairing high-margin items with lower-cost staples can enhance customer retention without sacrificing margins.

Conclusion: A Case for Cautious Optimism

While tariffs and inflation have introduced headwinds, they have also created a landscape where FAFH operators can differentiate through pricing power, innovation, and customer experience. The sector's ability to absorb cost increases and maintain demand-despite a 3.9% price surge in 2025 as reported in USDA data-highlights its resilience. For investors, the key lies in identifying companies that can navigate supply chain challenges while capitalizing on the experiential shift in consumer preferences. As 2026 unfolds, FAFH is poised to outperform at-home consumption, making it a strategic asset in a post-tariff economy.