Insight Pre-IPO Deep Dive: Leverage CE Transact US Dashboards for CAVA Growth Drivers

The Consumer Edge Insight Center (CEIC) is thrilled to take a deep dive into CAVA’s planned IPO this week, which is shaping up to be hotter than its Harissa.

Although the company’s S-1 boasts impressive growth, will it be able to keep the fire burning as consumers cut back and high mortgage rates put financial pressure on its suburban base? In today’s Pre-IPO deep dive, we show how Consumer Edge data can help track several of CAVA’s growth drivers in order to better assess how the restaurant chain is performing in the months ahead. The data through March shows that the company has been able to foster growth across channels, geographies, and demographics. Importantly, the strategic tenets outlined in the companies S-1 appear to be well-aligned with where the data shows the company is positioned in the marketplace. However, it will be important to continually monitor the company’s trajectory over the coming months to see how well it is executing on that strategy and whether it will be able to adjust to external forces.

Consumer Edge data is highly predictive of both CAVA total revenue and same-store sales. There is a 99.6% correlation to total revenue, and a 94.3% correlation to same-store growth.

Correlation vs Reported

Throughout 2022, CAVA y/y spend growth underperformed both the Fast Casual subindustry and the Limited-Service Restaurants industry. In the first three months of 2023, however, growth accelerated dramatically and the company began outperforming the larger sector. 

Narrowing down the view, CAVA’s growth has been consistently outperforming a smaller competitive set for all of the past year. Although the restaurant’s spend growth started 2022 neck-and-neck with Sweetgreen’s, Sweetgreen growth began to decelerate in the Spring leaving CAVA growth well ahead of new second place Shake Shack.

Indeed, stable cross-shop trends also speak to CAVA’s strength among its peers. Since the second half of 2020, there has been relatively little change in how many of CAVA’s guests also visit competitors over a given quarter, implying low threat levels and consistent customer loyalty.

CAVA vs. Subindustry and Industry

Note: CAVA Grill data includes all brands

CAVA vs Competitive Set

Note: CAVA Grill data includes all brands; other data is at brand level only

CAVA Cross-Shopping

Note: Brand level only

CAVA’s channel trends followed many restaurants during the pandemic when direct mobile/online orders grew to almost a quarter of total transactions in 2Q2020. Although the share of digital orders did fall back somewhat during 2021, for CAVA’s most recent fiscal quarter digital transactions were back up to peak pandemic levels. Third-party orders tracked by our data (which does not include Uber Eats) comprised another 5% of total transactions, with DoorDash the most common platform.

CAVA’s S-1 notes digital growth as a key strategic pillar going forward. This may be driven not only by digital’s rising share of transactions, but also how quickly the average digital order size is growing. Since 1Q2020, spend per digital order on the company’s platform has grown 33%, versus less than 10% for orders in-store or via DoorDash. There is likely still a lot of runway for digital order size. The average digital order on CAVA’s platform had 11% higher spend than the average in-store order, while the average DoorDash order had 40% higher spend than in-store, and that’s after assuming that 20% of spend charged to credit and debit cards went to tips and DoorDash fees.

After dipping from a COVID spike, the number of new guests coming in through CAVA’s digital platform has been steadily increasing since fall of 2021. In March of 2023, almost a third of new guests were first experiencing CAVA online. This emphasizes the importance of the company’s digital growth initiatives for exposing even more guests to CAVA’s unique cuisine.

However, the importance of store locations remains. Those digital guests have been increasingly also purchasing in-restaurant. 25% of digital customers also made an in-restaurant purchased in 1Q23, up from 22% in 1Q21.

Channel Share

Note:  CAVA Grill data includes all brands; Uber Eats third party orders not able to be tracked by our data

Channel Average Ticket Growth

Note: CAVA Grill data includes all brands
Note: CAVA Grill only; digital includes third-party delivery
Note: CAVA fiscal quarters; CAVA Grill brand only; digital includes third-party delivery

CAVA’s growth opportunity rests partly on its ability to grow further in existing markets, while also expanding into new regions. Reported double-digit same store sales the last two quarters confirm that existing locations still have growth trajectory in front of them. But how do the customers in more mature regions compare to those where newer restaurants are operating?

Spend per guest is fairly consistent across regions. Guests in the Northeast spend about 8% more than the average across regions, while guests in the West spend just under 5% less. Interestingly, spend per guest differs by only 34 cents in the Mid-Atlantic where stores are most mature and the Southwest which has the lowest average store age.

There are sharper differences in digital adoption across regions. In the Southeast, 40% of new customers come in through digital channels. The Northeast, despite having the highest average spend per guest, is seeing the fewest new guests coming in through digital at only 26%.

Besides regional geography, CAVA has also been successful concentrating on suburban locations, a big boon when the COVID-19 pandemic hit and many office workers were buying their lunches from their suburban homes instead of urban offices. As employees are called back to their offices, there is an open question as to whether CAVA’s suburban locations can remain successful.  Using homeownership as a proxy for suburban guests (and renting one’s home as a corresponding proxy for urban guests), we find that repeat purchase behavior has remained relatively similar between suburban and urban guests even through the first three months of 2023. This indicates that even if suburban guests are beginning to commute again, they are still using CAVA as a go-to meal either when they’re in the city for work or when they’re home on the weekends/the hybrid part of their work week.

Note:  Average of January, February, and March 2023; CAVA regions mapped to closest relevant Census Division; CAVA Grill only; third-party delivery included
Note:  January, February, and March 2023; CAVA regions mapped to closest relevant Census Division; CAVA Grill only; third-party delivery included
Note: CAVA Grill only

Although CAVA boasts of its wide appeal in its S-1 filing, in reality its guests’ ages are much more skewed than competitors like Panda Express and Panera Bread. CAVA has the largest skew towards 18-24 year olds among its competitive set, and the second-largest skew towards 25-34 year olds after SweetGreen. 

Similarly, Panda Express, Panera, and Chipotle all have much more even income distributions than CAVA.  CAVA, along with SweetGreen and Shake Shack, skews much more strongly than other Fast Casual players towards those making over $150,000 per year in income.

Both of these skews can have positive impacts – younger guests are more likely to eat out more frequently, and to age into becoming older guests. Higher income guests may be more likely to add a beverage to their order or pay for an extra side dish. 

In fact, the share of spend coming from 18-24 year olds has been increasing over the past few calendar quarters.  However, the share of spend coming from those making $150,000+ has decreased, with those making $100,000-150,000 beginning to grow. With every age group and every income group growing spend over the last year, these shifts are really more about the magnitude of growth for different segments than a sign that any particular group is visiting less.

Attitudinally, looking at where else CAVA guests spend their money is the best way to understand their psychographic profile. In many cases, a brand like CAVA may have aspirational values that don’t match what its customers are doing outside of its walls. In this case, however, CAVA’s positioning as supporting a healthy lifestyle and inclusive atmosphere should resonate with its base, whose spend outside the restaurant sector lines up with those values. Among the brands where CAVA customers are more likely to shop than our overall panel, five of the top twenty are fitness related.  There are also several fashion brands with a focus on sustainability and accessibility including Nuuly, Princess Polly, Reformation, and Rent the Runway. 

Demographics

Note:  Calendar 1Q23; all data for listed brand only; % of guests in each age bucket for each brand indexed to % of guests in each age bucket for fast Casual subindustry
Note:  Calendar 1Q23; all data for listed brand only; % of guests in each age bucket for each brand indexed to % of guests in each age bucket for fast Casual subindustry
Note:  Calendar 1Q23; all data for CAVA Grill only
Note:  Calendar 1Q23; all data for CAVA Grill only

If you’d like to benefit from using our data year-round to track trends and dynamics like these, reach out to insights@consumeredge.com.

Stacie Rabinowitz is the Head of Content for the CEIC. Explore more of her insights here and follow her on Twitter.