Consumers mix up tactics to meet food needs amid inflation

Dive Brief:

• As inflation rages, consumers are adjusting their shopping behavior to stay within budget while maintaining the quantity of food they purchase and even enjoying a few splurges, according to an analysis of retail sales data from July by IRI. Tactics include picking value-oriented options, purchasing more private label and even choosing a super-premium upgrade, depending on the category. 

• Some of the biggest shifts toward private label and value options are happening in categories with the greatest year-over-year price increases. These include fresh eggs, with prices up 46.8% in July 2022 vs. July 2021, butter and margarine (up 26.3%) and frozen dinners and entrees (up 22.8%).

• While inflationary pressures around key expenses such as energy have eased recently, food and beverage prices remain stubbornly high. 

Dive Insight:

It’s the quality, not the quantity: That’s the takeaway from IRI’s recent analysis of sales data from summer 2022, a time when food prices continue to set new records for increases.

“Consumers are responding to rising prices by shopping promotions, prioritizing value options, and trading down to avoid going without,” said Krishnakumar Davey, president of Thought Leadership for CPG and Retail at IRI. “We are advising our manufacturer clients to deploy all levers of strategic revenue management, prioritize strong in-market execution, and invest in retailer partnerships to ensure that the right products are available in the right places at the right times.”

While overall volume and unit sales of food and beverages held steady, IRI found consumers were choosing winners and losers within individual categories.

For example, consumers bought more meal solutions with value appeal, including pasta and frozen potatoes, both up 6 percentage points; rice (up 5 points); and canned soup (up 3 points), during the 13 weeks ending July 10, 2022, compared to the previous 13 weeks. Meanwhile, categories seeing declines include sports drinks (down 9 percentage points), refrigerated and frozen entrees (off 8 and 5 points, respectively), frozen novelties (down 6 points) and ready-to-drink coffee and tea (down 3 points).

But there is some nuance in the shift toward value. Drilling deeper into frozen entrees, while total category sales fell 5 percentage points in the 13 weeks ended July 31, higher-priced premium products gained about 1 point. Throughout the pandemic, this segment has seen an influx of new premium offerings that highlight more healthful and sustainable credentials.    

The premiumization trend also is taking place in beer. Premium and super-premium imported beer combined grew their share by 2.6 percentage points to reach more than half of category sales. Beer makers including Heineken and Constellation Brands have reported in recent earnings that their premium labels have thrived despite the inflationary environment.

But the premiumization trend isn’t benefiting all alcohol categories. In the spirits segment, value brands grew their share by 4.1 percentage points at the expense of premium and super-premium labels to reach more than 73% of sales. The CEO of Jim Beam maker Beam Suntory told CNBC last week that some price-sensitive consumers of whiskey and tequila are starting to choose less-expensive brands. 

And private label continued to show gains, with the largest share growth in commodity categories that have faced sharp price hikes due to supply chain issues and higher ingredient and packaging costs. In the four weeks ending July 24, private label gained the greatest share in fresh eggs (up 6 points), sugar (up 5), sour cream (up 4), bottled water (up 4) and shortening and oil and butter/butter blends (up 3).

In its recent earnings call, B&G Foods noted consumers’ shift toward private label at the expense of its Crisco shortening brand, which has seen a more than 25% price increase due to higher ingredient costs.