High food prices are taking a bite out of American budgets.
Inflation has risen from a rate of 1.4% in 2020 to 8.3% in 2022, according to the most current data. That’s an inflation rate literally six times higher in just two years. Sadly, wages haven’t risen to match, leaving most Americans burdened with the difference.
Food fear and food insecurity are very real, and both are going to increase while food prices run rampant. Grocery stores and other food and beverage retailers are going to see a massive change in consumer shopping behavior, and being prepared is the only way to help shoppers meet their needs.
We’ve grabbed the latest data from surveys and studies to help understand just how shoppers plan to make ends meet with less money in 2022. And, hopefully, provide some insight for retailers on how to position their food and beverage in this new market.
The Harris Poll asked over two-thousand adults in the US about their current feelings on inflation (amongst other concerns). The most common fear by far, one shared by 90% of those polled, was “high food prices.”
Consumers are seeing the same grocery budget fill less of the cart every single shopping trip, and it’s scaring the hell out of them.
Inflation in food prices is often actually worse than it looks, too. The USDA’s Economic Research Service says that meat prices have risen by as high as 14%, nearly double the general inflation rate.
Food prices are high. Shoppers are feeling the pinch. But how are they actually spending their food budget and feeding their families?
American shoppers are fighting high prices by branching out. They’re trying products they’ve never tried before, and they’re changing how often they shop.
Young shoppers are chasing deals first. The least surprising method of lowering the grocery bill is just to look for better deals. This method is most popular with younger consumers, who typically make less to begin with. In research firm Mintel’s “The Gen Z Food Consumer” report, the #1 deciding factor for how Gen Z chose their food and drink retailers was simply “low prices.”
Americans are trying plant-based products. We mentioned above how meat price inflation is almost twice the rate of average inflation. While meat has always been a staple of American home cuisine, often more than other nations, right now the price is wrong. According to the Harris Poll Covid-19 Tracker Wave poll, 55% of consumers said the cost of meat has them curious about trying plant-based meat and dairy alternatives.
Consumers are making fewer trips to the grocery store. Some Americans aren’t necessarily changing what they buy, but how much and how often they buy. Buying the same products they already enjoy in bulk almost always comes with cost savings, and Americans are taking advantage of that. In that same Harris Poll, over half of those polled said they were taking fewer shopping trips, a side-effect of bulk buying.
Retailers should take a hard look at these three cost-cutting measures and tailor their strategies accordingly. If your product caters to the young shopper, price is the first, last, and only concern. Placing your food or beverage at lower cost and in discount grocery stores may be the smart play.
Companies with plant-based meat and dairy alternatives, especially those at a lower price point than meat, are ideally positioned to take advantage.
Meanwhile, almost every food or beverage retailer might find success bundling their products in larger quantities or multi-packs to meet consumers’ new spending habits.
While consumers normally show a certain sense of loyalty to the name brands they’ve enjoyed in the past, skyrocketing food prices have their eyes wandering.
Mintel’s “Private Label Food and Drink” survey shows that interest in store brands is increasing. When asked about their purchase frequency, the bulk (65%) said they were purchasing store brands at the same frequency they always did. A little boring, I know, but what’s interesting is that nearly a third (30%) said they were buying private labels more often, with only a tiny number (5%) saying they’re buying private labels less.
For those buying more, their number one stated reason was rising food and drink prices. Perhaps even more interesting, 57% of those polled said they felt that store brands were equal in quality to name brands (for small-ticket products, at least).
John Owen, the Associate Director of Food and Retail at Mintel, notes that private labels are increasing in interest more than they did even during the pandemic:
“While private label food and drink lost market share in 2020 and 2021 amid the disruption of the pandemic, it is likely to regain momentum in 2022 as spiking inflation makes the savings of store brands more compelling. The full potential of private label, however, revolves around more than just dollars and cents. For grocery retailers, store brands may represent a key opportunity to meet evolving needs and forge deeper relationships with shoppers.”
For those food and beverage companies not making private or store brand products, don’t worry. All hope isn’t lost.
In the “Private Label Food and Drink” report of 2022, those more hesitant to buy store brand items were more bullish on taste. When asked when they don’t buy store brand, they said they just preferred the taste of their name brand item.
If your food or beverage product isn’t a store brand but wants to stay on consumer radar, focusing on quality and taste in your marketing will help attract and retain even penny-pinching shoppers.
Luckily, getting shoppers to actually taste your product is pretty straightforward.
Americans are concerned about rising food prices, and there’s no guarantee that those prices will be dropping in the near future. Sure, inflation is already showing signs of slowing, but will rates be dropping back to 2020 or 2019 levels? That’s a tough call to make.
With over half of Americans saying they’ve had to cut back on essential spending, food and beverage bands are going to have to pivot their efforts to match shopper’s new spending habits.
One of the most effective ways to grab attention in grocery stores is still the product sample. To learn more about how to turn product samples into memorable live experiences, and leave an impression in the mind of thrifty shoppers, reach out to an expert at Inspira Marketing today.