Follow the Money (in US Food & Beverage)

I needed a refresher course. Let's get up to speed together, shall we?

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A quick bit of backstory on this one. Several years ago, back when I was working in equity research at an investment bank, I wrote a primer on how the (then) roughly $1.7 trillion U.S. food and beverage ecosystem was actually put together… how and where Americans were spending their money on food (including beverage). It was pre-COVID and it did its job for a while.

It’s been on my list to revisit ever since, because so much has changed. E-commerce went from a borderline rounding error to a real channel, Walmart and Costco have accelerated to a degree that’s almost hard to believe (go pull up their stock charts), and then there’s the small matter of whatever Gen Z is doing — or not doing — at the grocery store and the bar.

So consider this the update. Same question the original asked (where does the consumption dollar actually go?) with fresh numbers and a few things I understand a lot better this second time around.

And accompanying this breakdown is a pretty cool interactive module I built…. you can find it here: www.datahud.ai/foodbev. Hover any channel for the detail, toggle the alcohol layer on and off, and filter by scope.

The ~8th biggest “economy” in the world

We all eat and drink every day (mostly). Multiply that by ~340 million people, roughly 3x a day, 365 days a year, and you get a number so big it stops really meaning anything. Here’s a look at it anyway…

$2,500,000,000,000.

$2.5 trillion. This is what Americans spent on food in 2025, according to the latest USDA Food Expenditure Series data, which is the closest thing we have to a full accounting of the national grocery bill plus the national restaurant tab. One thing to get straight up front is that when the government says “food,” it means food and non-alcoholic beverages — your coffee, soda, juice, and bottled water all live inside that $2.5 trillion. Alcohol gets its own separate ledger, and it’s not small. Alcohol adds another $300 billion or so. So we’re pushing almost $3 trillion/year. If our appetites were a country, it would rank around the 8th largest economy in the world.

So, let’s follow the money. Every one of those dollars left somebody’s wallet and landed in somebody’s register, and where it landed tells you almost everything about how the modern American food business actually works…. who’s winning, who’s quietly dying, and why the headlines about both are usually only half right.

This is a helpful primer. By the end you’ll have a map of the whole ecosystem.

The first fork in the road

Every food dollar makes one decision before any other. That is…

Am I being spent on food to eat at home, or food to eat somewhere else?

The government calls these food-at-home (FAH) and food-away-from-home (FAFH), and the split is the single most important fact about the industry. In 2025 it ran roughly $1.1 trillion at home, $1.4 trillion away — call it 44% / 56%.

Now here’s the first thing that often alarms folks. If you counted meals instead of dollars, that split would flip almost completely. Something like 80% of America’s eating occasions are still sourced from home. We are, by headcount, overwhelmingly a nation that eats out of its own kitchen.

So how does the smaller share of meals win the larger share of dollars?

Price.

A restaurant meal costs a multiple of the equivalent home-cooked one… you’re paying for the kitchen, the labor, the rent, the table, the convenience, and a margin on all of it. Eating out is the expensive way to eat, so it punches far above its weight in spending. The 80/20 occasions story and the 44/56 dollars story aren’t really in conflict… the gap between them is just the price premium of letting someone else cook.

And that gap has been widening for decades. And for most of the post-2020/COVID stretch, menu prices climbed faster than grocery prices, which means the same eating-out habits throw off more dollars every year.

Walking the at-home aisles

The $1.1 trillion Americans spend on food to eat at home doesn’t spread evenly. It piles up in a few places.

Grocery stores are still the giant — about $617 billion, more than half of all at-home spending. This is the traditional supermarket world. Think Kroger (around $150 billion in revenue, the biggest pure-play grocer), Albertsons (~$80 billion, the Safeway-Vons-Jewel empire), Publix (~$60 billion and beloved in the Southeast), Ahold Delhaize’s American banners (Food Lion, Stop & Shop, Giant). When you picture “the grocery store,” you’re picturing this bucket.

The warehouse clubs and supercenters are the challenger — about $289 billion, and this is where the story gets interesting. This bucket is Walmart’s Supercenters, Sam’s Club, Costco, BJ’s, and Target. And here’s a trap worth flagging in the categorization, because it trips up almost everyone… Walmart and Costco are not in the “grocery stores” line. They live here, in clubs-and-supercenters. The bucket they’re draining is the traditional-supermarket one.

How much are they draining? Walmart alone now sells something like $272 billion of “grocery” merchandise in the U.S. and holds roughly 20% of the entire American grocery market…. a bigger slice than anyone else by a wide margin. Costco’s food, sundries, and fresh categories run well over $100 billion in the U.S. The top 10 grocers, all formats combined, now control about 70% of the market.

This raises an obvious question… if Walmart and Costco have been growing food sales like crazy, why does that $289 billion bucket only grow at a mild single-digit clip?

The answer is the most useful thing in this entire primer… a good pinch back to reality if you’re inside or running a hyper-growth CPG brand…

The food-at-home pie barely grows in real terms. It’s a near-flat category — you can only eat so much. So when Walmart, Costco, Aldi, and Amazon post big gains, those gains aren’t coming from a growing pie. They’re coming out of someone else’s slice — the regional supermarket, the drugstore aisle, the weaker mass retailer. It’s redistribution, not expansion. The drama is happening inside the channel, between companies, in a way the channel’s calm topline total completely hides.

The rest of the at-home dollar scatters into smaller buckets… roughly $122 billion in “other stores” (dollar stores like Dollar General, drugstores, and the pure-play online players — Amazon, Instacart). About $39 billion in specialty and natural grocers (Whole Foods, Sprouts, the ethnic and specialty shops). $13 billion at convenience stores (7-Eleven, Casey’s, Wawa). And a small but fast-growing $13 billion in direct selling… think farmers markets, CSAs, and the brands who ship DTC.

That last bucket is tiny, but watch it. It’s grown faster than almost anything else on the at-home side, and it’s where a lot of the buzzy new stuff lands these days.

The away-from-home counter

Let’s cross over to the $1.4 trillion Americans spend eating out… the geography changes.

The two giants are the restaurants. Limited-service — fast food and fast casual — is the single biggest line in the entire food economy at roughly $516 billion. This is McDonald’s (about $53 billion in U.S. system-wide sales by itself), Starbucks, Chick-fil-A (an astonishing $22.7 billion out of fewer than 3,100 stores), Taco Bell, Chipotle, and the fast-casual upstarts like Cava nipping at their heels. Full-service restaurants — the sit-down world of Olive Garden, Texas Roadhouse, your local independent — run close behind at about $488 billion, and they’ve been the faster-growing of the two lately, clawing back share they bled during the pandemic.

There’s an aspect of “away-from-home” that was always confusing to folks, which is that a huge chunk of it isn’t restaurants at all…

There’s about $145 billion in foodservice run inside traditional retail… think the grocery hot bar, the Costco food court, the made-to-order counter at Wawa. There’s another $85 billion flowing through schools and colleges, and another $69 billion in food “furnished” by institutions like hospitals, the military, nursing homes, prisons. Add hotels, stadiums and theme parks, airlines, office cafeterias, and vending, and you’ve got a few hundred billion dollars of eating-out that no one ever writes a trend piece about. Much of this world is run by three contract giants you’ve probably never thought of as food companies — Compass Group (about $29 billion in North America), Aramark, and Sodexo.

This invisible institutional half matters for a reason we’re about to get to… it’s pretty stable and unremarkable. It doesn’t open and close with the economic mood. It’s a sort of the ballast under the restaurant industry’s stormier waters.

Oh, and then there are bars… about $10 billion of food is sold in in “drinking places,” plus a grab-bag “other” category. Modest on the food side, though the alcohol they pour is tracked in a whole separate ledger, and of course it’s not small.

The restaurant paradox

Now for the part that confuses everyone…

You have read, repeatedly, that the American restaurant is in trouble. In 2024, bankruptcies wiped out something like 350 full-service chain locations…. Red Lobster, TGI Fridays, Hooters, Rubio’s, Buca di Beppo, On the Border, one beloved name after another filing for Chapter 11. Restaurant bankruptcy filings jumped nearly 50%. The trade press has been running an obituary a week.

And the pressure hasn’t let up… if anything it’s climbed the food chain. Heading into 2026, the closure list stopped being just wobbly casual-dining names and started including the giants… Wendy’s plans to shut 300 to 350 restaurants, Papa John’s around 300, Pizza Hut 250, Jack in the Box up to 100, and even Darden is retiring its Bahama Breeze chain. Black Box Intelligence pegs roughly 9% of full-service and 4% of limited-service restaurants as at risk of closing this year.

And yet, the away-from-home number we just walked through grew. Spending at restaurants went up. So which is it? Boom or bust?

It’s both.

First: the growth is price, not traffic. Menu prices are up something like 25% since 2020. Through 2024 and 2025, the number of actual visits to chain restaurants ran flat-to-negative most months, while the dollars spent ticked up low-single-digits. Put those together and you get the truth… restaurants are selling roughly the same number of meals — or fewer — for a lot more money. The spending line rises on inflation while the foot traffic stalls or shrinks. The biggest 500 chains grew sales just 3.1% in 2024, below the 4.1% menu inflation that year — which is a polite way of saying they collectively lost customers even as their revenue grew. America’s three biggest chains (McDonald’s, Starbucks, Chick-fil-A) managed a combined 1.2% growth after posting more than 11% the year before.

Second: the “bust” is a margin story, not a demand story. A restaurant can grow its sales and still go bankrupt… and many did. Labor got more expensive, food got more expensive, and interest rates made the debt that private-equity owners had loaded onto these chains suddenly unbearable. Red Lobster and TGI Fridays weren’t killed by a nation that stopped eating out; they were killed by balance sheets that couldn’t survive the cost of the eating-out they still got. And the 2026 wave is the same lesson in a different key… most of those Wendy’s and Papa John’s closures aren’t bankruptcies at all — they’re deliberate removals from the system. Papa John’s, for one, is cutting stores that are a decade old, ring up under $600,000 a year, and lose money at the four-wall level. That’s portfolio surgery to protect the rest of the system.

Third: redistribution again. Closures don’t vaporize the demand but rather reroute it, and the operators doing the cutting say so… Jack in the Box sees sales at nearby stores jump about 30% when a neighbor closes, and Noodles & Company figures it keeps roughly 30% of a shuttered location’s sales as diners simply shift to the next-closest one. The dollars migrate to the survivors and to value… Casual Dining’s value plays surged in 2025. Cava, Wingstop, and Texas Roadhouse compounded right through the gloom. And that stable institutional half (schools, hospitals, contract feeders) sits underneath, barely flinching at all.

So the aggregate looks fine but the distribution is brutal. Some chains are feasting, more are quietly starving, the average comes out positive, and a writer can honestly file either the boom story or the bust story depending on which row of the spreadsheet they’re staring at. The sophisticated read is to hold both at once… nominal dollars up, real traffic down, margins squeezed, the weak failing and the strong absorbing their traffic.

The new kids at the table

If you spend any time online, you’d think the future of food is being sold through a phone by a 24-year-old with a ring light. TikTok Shop, DTC brands, Shopify storefronts, viral snacks, “TikTok made me buy it.” So where does all of that fit on our map?

Mostly… nowhere yet.

In dollar terms, the emerging channels are still a rounding error. TikTok Shop did about $9 billion in total U.S. sales in its first full year, of which food and beverage was maybe $1.2–1.4 billion…. real money, and the fastest-growing category on the platform (up something like 220% in a year), but a speck against a $2.5 trillion pie. Direct-to-consumer (DTC) food… meal kits aside, at $10–13 billion… is a collection of coffee subscriptions, better-for-you snacks, supplements, and specialty meats. Shopify isn’t really even a channel… it’s the plumbing under thousands of these DTC brands.

Here’s the nuance that actually matters, though. These channels are reshaping discovery, not checkout. Gen Z finds the product on TikTok and then buys i… at Target, at the grocery store, through a delivery app. The “DTC darlings” you’ve heard of — Liquid Death, Olipop, Magic Spoon — now do the bulk of their volume on regular retail shelves. The screen is maybe the new billboard, but the IRL register is still the register.

Which brings us to the platforms that do move serious volume… the delivery apps. Instacart pushed about $33.5 billion of groceries through its platform in 2024. DoorDash and Uber Eats move well over $100 billion of restaurant orders between them. Those are big, real numbers.

And they are exactly where the map starts to lie. So let’s end there…

Three ways the map lies

A primer that only told you the numbers would leave you worse off than when you started, because the raw numbers in this industry are sort of booby-trapped. Here are the three traps, in order of how often smart people fall into them.

Trap 1: mistaking price for volume. We covered this with restaurants, but it’s everywhere. Nearly every “spending grew” headline in food right now is mostly inflation. The dollars are real, but they don’t mean more food was sold, more meals were eaten, or more customers showed up. Our underlying physical consumption behavior changes very slowly over time. If you want to know whether a business is actually winning, you have to find the volume (i.e. units, traffic, transactions) hiding underneath the dollar amounts. The two have been telling different stories for years.

Trap 2: mistaking the average for the experience. Again, the food & beverage economy is barely growing in real terms, which means it’s mostly a redistribution machine. Walmart gains, the regional grocer loses. Chick-fil-A feasts, Red Lobster files. The category total stays calm and uneventful while underneath it there’s a knife fight. If you only read the aggregate, you will conclude that nothing is happening… at the precise moment that everything is happening. The action is always within the bucket, between the players. Never trust a “stable” total.

Trap 3: counting the same dollar twice. This is the subtle one. When you buy Kroger groceries through Instacart, that grocery money is Kroger’s sale… it’s already counted in the grocery-store total. Instacart’s $33.5 billion isn’t new money in the system… it’s the same money, re-labeled by how it got to your door. Same with restaurant delivery… a DoorDashed burrito is already counted as a Chipotle sale. Same with the drive-thru, the curbside pickup, the “online grocery” figure. These are all cross-cuts… the same dollars sliced by fulfillment method instead of by store… and if you stack them on top of the store totals, you’ll double, triple, quadruple-count your way to a number that means nothing.

These traps have a cousin worth naming… these players don’t even report “sales” the same way. A grocer reports the money it actually books. A franchised chain reports system-wide sales… everything customers spend across all its franchisees, far more than the parent company’s own revenue. A platform like Instacart reports something called GMV (the “gross merch value” flowing through it) even though it keeps only about a 10% cut as actual revenue. Line those up in a single column without labeling them and you’re comparing three different things and double-counting the platforms against the stores they sit on top of. The genuinely new money the delivery economy adds is just the fees and tips layered on top of the food. Of course this is a real, fast-growing services business with real earnings, but it’s not food spending, and not to be blended into the food pie.

Internalize these traps and you can read any food-industry chart in the country without getting it wrong.

So, what’s actually going on

Step back from the map and a single picture emerges, and it’s not the one the topline number suggests.

The American food economy is not really growing. It’s reorganizing. The pie is roughly flat in real terms… what’s changing is who holds the knife. Retail power is concentrating into a handful of giant share-gainers — Walmart, Costco, Amazon, Aldi, Kroger — squeezing the brands that sell through them and the smaller stores that compete with them. Eating out keeps winning a bigger share of the dollar even as it wins fewer of the actual meals, because the price and demand of convenience keeps rising. The strongest restaurants are absorbing the customers of the ones going bankrupt. And a layer of digital intermediaries… delivery apps, social commerce, DTC… is wedging itself between the brand and your mouth, capturing margin and attention even where it isn’t yet capturing much volume.

That’s the bird’s-eye view… a $2.5 trillion table that looks placid from a distance and is anything but up close. The interesting questions in this business are almost never how big is it… that number barely moves in real terms. They’re who’s gaining, who’s quietly dying, and which dollar is real.

Those are the questions we’ll spend our time on.

Now you have the map. Next time someone tells you food spending is booming… or that the restaurant is dead… you’ll know which trap they fell into.

Cheers,

Kevin