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Inflation has consumers rethinking food spending

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Supply chain disruptions, gas prices, Russia, living costs all affecting shoppers’ perceptions.

Inflation has dominated the trade and consumer headlines since early fall of last year. The 40-year high inflation has consumers rethinking their grocery and restaurant choices, according to Anne-Marie Roerink, president of 210 Analytics LLC.

According to the June edition of the IRI monthly survey of primary shoppers, 45% of American households describe their financial situation as being worse than a year ago and 41% feel their financial situation one year from now will look worse than it does today. Consequently, consumers are applying many of the lessons learned during the Great Recession to tighten spending.

Fully 96% of consumers say they are paying somewhat or a lot more for groceries than they did last year — listing examples of price inflation across virtually every department in the store. Concern over inflation reached its most widespread level yet, at 93% of all grocery shoppers. Up month over month, 81% of grocery shoppers made changes to what and where they purchased in June. This is up from 50% in the fall of 2021. The dominant changes are looking for sales specials (54%), skipping non-essentials (45%), finding coupons (33%) and buying more private or other low-cost brands (29%). Despite the high gas prices, 17% cherry-pick specials across retailers and 16% now do some of their shopping at lower-cost retailers.

The survey revealed that sales specials, while popular, are still far below pre-pandemic levels and consumers are taking notice: 59% say fewer of the items they want are on sale and 43% say items are not discounted as much as they used to be. About half of shoppers, 51%, are stocking-up on certain items more than usual, 18% out of fear they will not be available next time and 26% out of concern that prices may rise further. All of this points to the great power of relevant, targeted promotions if supply chain conditions allow for it, Roerink noted.

Result showed 95% of shoppers in June were concerned about the higher gas prices and 72% changed their driving habits because of it, from trying to stock up more to delaying road trips.

The share of home-prepared meals continued to average around 79-80% similar since March 2020. The average share of home-prepared meals is higher among low-income shoppers, at 81.7%, versus high-income shoppers, at 76.7%.

Restaurant engagement remained high in June, virtually unchanged from spring levels. Fifty-five percent of consumers got restaurant takeout in June and 52% dined on-premise. An additional 19% had restaurant food delivered.

Roerinnk relayed that the level of new COVID-19 cases no longer appears to have a significant impact on whether people shop in-store or online. Less than one-quarter of Americans are extremely concerned about COVID-19 as of June. In-store trips are holding at a high 87% of total trips while online trips are near equally divided in home delivery (6%) and store pickup (7%).

“These measures have resulted in prolonged unit and volume pressure across most categories, while dollar sales are boosted by inflation,” Roerink said.  

Inflation insights

The price per unit across all foods and beverages in the IRI-measured multi-outlet stores, including supermarkets, club, mass, supercenter, drug and military, accelerated further to an increase of 12.3% in June versus year ago. This is up from an increase of 11.9% in the second quarter of the year. June inflation was in the double digits in the center of the store (up 11.3%) as well as in perishables (up 11.8%) and compared to two years ago, prices across all foods and beverages were up 24.2%.

At the meat department, the average price per pound across all cuts and kinds, both fixed and random weight, was $4.59 in June 2022, up two cents from the May level and up 8.6% versus year ago. This means meat had below-average inflation compared to the total food and beverage number, Roerink noted.

“In the past few months, meat inflation has been milder than the 52-week average, indicating that the increases are moderating.”

Inflation in processed meat did stay in the double digits, up 14.5% in June 2022.

On the fresh meat side, inflation rates for the first six months of the year were a mix of single- and double-digit levels. Beef, lamb and exotic meats, such as bison, had single-digit inflation year-to-date, as did smoked ham. Ground beef, chicken, bacon, breakfast sausage and dinner sausage were among thehighest.  

June pounds tracked in line with the volume sales seen in 2019. This meant year-on-year declines of 2.7%, predominantly driven by processed meat.

While dollar sales continued to trend at more 25% above 2019 levels, volume has trended closer and closer to the 2019 baseline. Sales dipped below 2019 levels for the first time in May and remained down slightly in June of 2022.

While the total meat department gained 5.7% in dollar sales, IRI data showed poultry delivered the most growth. Chicken grew 18.3% in June 2022 versus year ago and turkey rose 7.8%. Neither beef, nor lamb, veal or exotics could reach the June 2021 dollar levels, despite the inflationary boost.

Looking ahead, Roerink said continued supply chain disruptions, including the rising costs of gasoline and diesel, coupled with the Russian sanctions that went in effect on June 1 for a number of categories as well as rises in housing and rent prices are all combining to hit shoppers’ perceptions at the grocery store as well as actual pocketbooks. 

“Inflation will have a profound impact on grocery and total food spending. However, we are not seeing a race to the bottom for cost-savings measures. Depending on the meal occasion, consumers are moving between value and premiumization, scratch and convenience, brands and store brands — making grocery patterns more unpredictable than ever.”

 

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