Consumers are haggling, buying in bulk and jumping on brands amid food inflation, IRI flags

08/10/2022 — Consumers are responding to food inflation by making value choices, e.g. E.g. opting for high-quality products, discounting offers with reduced prices and moving away from luxury brands to cheaper private labels.

The findings, published by The Information Resources Inc. (IRI), are based on the latest point-of-sale data and include information from all US grocery distribution channels, including e-commerce.

According to July data, consumer goods prices are still elevated across all categories.

Commenting on grocery retail, Krishnakumar Davey, President of Thought Leadership for Consumer Packaged Goods and Retail, says that “consumers are responding to rising prices with grocery shopping, prioritizing value options and bargaining down to avoid going without.”

Davey says retailers must have the tools to quickly adapt to changes in consumer preferences to ensure they are offering the right range at prices that appeal to value-conscious shoppers and their most valued customers.

Sustained inflation
Food and beverage inflation is both sequential and annual, despite recent price declines in other sectors of the economy, such as B. fuel, still available.

Davey says consumers react to rising prices with shopping promotions.Chilled eggs, for example, increased by 5.9% in June compared to May and by 46.8% compared to July 2021 and July 2022.

Frozen dinners and appetizers have seen a steep rise with a 3.5% increase between June and July 2022, while the annual difference between July 2021 and July 2022 represents a growth of 22.8%.

Even though the cost of several food categories has started to fall recently, year-on-year prices tend to remain high, bringing little relief to consumers. Looking at the category with the largest price decline, fresh citrus fell 2.4% from June 2022 to July 2022 but remains at a 26.7% increase compared to July 2021 and July 2022.

amount catches the eye
IRI has observed that consumers are choosing value-based categories to conserve quantity, and despite price inflation, total volume and units of food and beverages have remained stable.

However, data showing the 13-week period ended July 10, 2022 compared to the previous 13-week period shows that they are buying cheaper meal options and opting for filling ingredients such as pasta, rice, frozen potatoes and canned soup.

Sports drinks, ready-to-drink coffee and tea, frozen novelty, chilled entrees, and frozen meals and entrees are just a few of the categories where consumers are buying less.

Consumers are bargain hunting
IRI found promotional activity — like weekly rebates and coupons — in many food and drink categories is returning to pre-pandemic levels as supply chain issues ease and shoppers become more price-sensitive.

When there are promotions, you want consumers to respond. In the previous four weeks ended July 10, 2022, revenue share increased “dramatically” in several grocery retail categories where promotions and discounts were rampant.

According to the latest statistics from the IRI, with an increase in promotions and discounts in these aforementioned weeks, the top five food and drink categories closely resemble the same four weeks in 2019 before the pandemic, with around half of sales in these categories coming from promotional goods .

For example, 55% of ice cream and sorbet purchases were made at discounted prices over a four-week period, an increase of 9 percentage points from two months earlier. Consumers are opting for value-based categories to get the crowd.

Additionally, these promotions generated 13 percentage points more category sales than two months ago, for a total increase of 93%.

Looking for labels
In addition, IRI found that consumers are switching from a preferred brand or higher-priced product to a lower price. Across many product categories, including spirits, lower-priced brands displaced premium and super-premium spirits, increasing their share by 73.6% in the 13 weeks ended July 31, 2022 compared to the previous 13 weeks.

Private label continues to proliferate across several food categories as consumers move away from national brands and into product categories or areas where private label is already well known.

The fresh egg, sugar, sour cream, shortening and oil, butter and margarine mixes, flour, frozen meat and bottled water categories saw the largest increases in private label share for the four weeks ended July 24, 2022.

Prioritization of premium products
Consumers are swapping smaller luxury goods for larger ones, reflecting the behavior of the 2008 recession. As a result, premiumization persists in some categories despite rising inflation.

For example, in the same 13-week comparison, the total revenue share for imported premium and super-premium beer increased 2.6 percentage points to 51.2% of category revenue.

The share of more expensive goods in the premium category has increased by about a percentage point in a few other categories, including frozen meals/appetizers and chilled juices and beverages.

The IRI also reported slower spending outside of food and drink. Foil pans, household cleaning towels, toilet paper, facial tissues, laundry detergent and household cleaning products are just a few of the products that consumers are buying less.

Edited by Mieke Meintjes

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