Consumers ‘laser-focused’ on discounts as food prices hit four-decade high

Dive Brief:

• Food-at-home prices jumped 10.8% over the past year — the largest 12-month increase in over 40 years — according to the U.S. Bureau of Labor Statistics’ Consumer Price Index data for April. Meat, poultry, fish and eggs saw the biggest 12-month increase of the major food groups, up 14.3% — its largest jump since May 1979.
• On a monthly basis, five of the six major grocery food groups saw gains, including dairy, which had its biggest increase since July 2007. The meat, poultry, fish and eggs group rose 1.4% as the price index for eggs soared 10.3% in April.
• The unrelenting increase in food prices is testing consumers, who are having to curb costs through tactics such as “trading down” to less expensive items, or switching to private label brands, analysts say. 

Dive Insight:

The April food price index data indicates that inflationary forces are continuing relatively unchecked. This has consumers “laser-focused” on finding the best prices or discounts, Spencer Baird, interim CEO of Inmar Intelligence, told Food Dive.

“Shoppers have already been adjusting behaviors in response to inflation in a number of areas, with trading down already very apparent with meat products in particular, if not cutting back altogether,” Baird said.

Baird noted that consumers have been looking for deals and buying cheaper meats if their preferred choice is too expensive. A recent CoBank report found that consumers are likely to trade down to chicken as beef costs continue to grow. On a 12-month basis, the price index for beef increased by 14.3% in April, while chicken rose by 16.4%, according to BLS figures.

Private label items are also attracting consumers with their lower prices. Recent Inmar survey data indicated that 81% of consumers bought private-label items on their last grocery trip, and 72% of consumers said that they believe store brands are of the same quality as name brands, according to Baird.

And some consumers are also buying fewer items overall. More than one-third of shoppers said that they have either reduced the number of items that they purchase per trip or have stopped shopping for food as much, according to Inmar data.

Shoppers’ willingness to continue purchasing staple items is also being tested as prices rise.

Poultry and egg prices are rising sharply as the ongoing avian influenza crisis impacts chicken and turkey flocks across the country. According to April BLS data, the price of poultry increased 15.3% on a 12-month basis, and 3% over the past month. Highly pathogenic avian influenza has affected nearly 38 million birds in 310 commercial and backyard flocks as of Friday morning, according to the USDA. Poultry producers like Hormel and Tyson have reported infected birds in their supply chains.

Egg laying flocks and egg prices have also been pressured by the HPAI outbreak. The USDA’s most recent Egg Markets Overview indicated that the average advertised retail price of a dozen large white shell eggs had risen to nearly $2.62, rivaling prices at the start of the pandemic.

Butter prices have also soared over the past year. According to April CPI data, butter prices increased 16% on a 12-month basis and 3.7% month over month. Margarine prices, meanwhile, have risen more than 23% on a 12-month basis, and shot up 7.1% in the past month. Prices for the oil-based spread and many edible oils are being pressured by the conflict in Ukraine and a palm oil export ban in Indonesia.