Posts Tagged “inflation”
A recent survey conducted by R.R. Donnelley & Sons Co. found that grocery consumers across key demographic groups have reached a breaking point and are seeking out lower-cost goods.
RRD’s annual “2024 CPG + Grocery Consumer Report” speaks to how inflation is continuing to influence consumer purchasing behavior, according to a news release. The report is based on a survey of more than 1,800 adults in the U.S.
According to the survey, 55% of shoppers said they’ll stay loyal to the store they shop at most often — particularly baby boomers (61%) and affluent consumers (64%) — while 45% are open to changing stores for greater savings, particularly millennials (50%).
“Consumers are becoming more judicious with their purchasing decisions, in large part due to the continued impact of external factors including inflation,” Beth Johnson, grocery industry expert and director of client strategy at RRD, said in the release. “These factors are testing the loyalty of shoppers, making it more important than ever for marketers to rethink how they engage with buyers. Brands will need to meet shoppers where they are by emphasizing value and savings to hold their attention.”
Top findings from the survey include:
- 88% of consumers express frustration with rising prices across categories, including groceries, gas and restaurants. This sentiment was most associated with grocery shopping overall (86%), driven by the rising costs of food and beverages (80%).
- 87% of baby boomers and 79% of households with $100,000 or more in income express concern or frustration over food and beverage prices.
- Consumers are adjusting their shopping behaviors by stocking up during sales (41%), purchasing fewer items (37%), switching to less-expensive name brands (37%), switching from name brands to private-label brands (35%), using more coupons and discounts (34%) and by sticking to their shopping lists (32%).
- Coupon redemption in mass and variety/discount stores increased by 9% and 37%, respectively, compared to the first half of 2023.
- Regarding store selection, 68% of consumers prioritize convenience and proximity to their homes, with baby boomers valuing close proximity the most (76%).
- Many shoppers (32%) also report prioritizing an engaging shopping experience, even if the store is farther away than others — particularly Generation Z (39%), millennials (37%) and parents (38%).
Shoppers are making it clear about what they want from their grocery stores and consumer packaged goods brands: convenience, value and personalization, according to the release.
Consumers reported prioritizing a variety of factors including relevant deals (59%), personalized discounts (55%) and tailored recommendations (52%).
Staying local was also shown to be important to shoppers, with 57% preferring to shop at stores that feature locally grown, raised or produced products and 56% reporting that they would like to see more advertising for products produced or grown close by, according to the release.
For retailer or brand selection, fair prices are deemed to be the biggest priority for consumers (58%), up 5 percentage points compared to last year. High-quality products (45%) and coupons and discounts (41%) are also driving factors for shoppers. Notably, data privacy (39%) is also influencing consumers’ decision-making, up 19 percentage points from last year, the release said.
Chicago — Circana, a leading advisor on the complexity of consumer behavior, recently released a new report providing a complete view of food and beverage consumption trends, both at home and away from home.
The 39th annual report, “Eating Patterns in America,” highlights a growing trend toward at-home dining over the past year, with 86% of eating occasions sourced from home.
While retail volumes show modest growth, foodservice traffic remains under pressure. However, significant opportunities remain in both sectors, with American consumers spending nearly $1.7 trillion annually on food and beverages. The report offers strategic insights for manufacturers, retailers, foodservice operators, and distributors aiming to better engage with their target consumers.
“Despite easing inflation, consumers continue to face the cumulative impact of several years of rising prices and ongoing economic challenges,” said David Portalatin, senior vice president and industry advisor, Food and Foodservice, Circana.
“With dining out costing four times more than eating at home, many are cutting back on restaurant visits. Meal patterns have shifted as consumers spend more time at home and adapt to new daily rhythms. However, convenience and health remain top priorities, with consumers willing to spend on products offering added benefits, especially in the beverage space, where innovation is rising to meet these demands.”
The report highlights several key findings, including:
- Home-Centric Dining: In the post-pandemic era, at-home food and beverage consumption remains a cornerstone of daily life. Regardless of where meals were sourced, consumers ate 116 more meals at home over the past year than they did pre-pandemic. As consumers seek the optimal balance between value and convenience, low price is not the sole driver of a compelling value proposition. New mobility patterns, inflationary pressures, and evolving attitudes around well-being offer opportunities to craft retail solutions that help consumers source meals, snacks, and beverages for both in-home and on-the-go occasions. While gains in away-from-home consumption are leveling off, fast casual restaurants are gaining market share. Despite a challenging macroeconomic environment, some foodservice operators have demonstrated resilience and achieved growth. Focusing on efficiency, innovation in menu offerings and delivering value will be key to driving continued growth.
- Daypart Disruption: While breakfast, lunch, and dinner remain the primary meal occasions, their composition, timing, and sources are evolving to fit consumers’ daily routines. Breakfast now starts earlier, with mid-morning snacks away from home rising in popularity. Lunch has shifted significantly due to changes in workplace mobility, with lunchtime traffic falling to about half of pre-pandemic levels. Snack consumption is growing, with consumers increasingly preferring quick bites or meal replacements over larger meals. As snacking becomes more common throughout the day, the boundaries between traditional mealtimes will continue to blur.
- Beverage Innovation: Over the past year, beverage consumption has surged, particularly among coffee, carbonated soft drinks, and functional beverages. This rise in consumption is driven by manufacturers’ innovations aimed at addressing evolving consumer needs. Today’s beverages cater to various functional requirements, including hydration, energy, and nutrition. Coffee remains a daily staple for many, offering both comfort and an energy boost. Carbonated soft drinks continue to be popular for their refreshing qualities, while functional beverages are gaining traction for their added benefits, such as vitamins, electrolytes, and other health-enhancing ingredients. This trend reflects a broader movement toward beverages that serve as both enjoyable and functional components of daily life, adapting to changing lifestyles and preferences.
For more information or to purchase the full report, contact your Circana representative or click here.
About Circana
Circana is a leading advisor on the complexity of consumer behavior. Through superior technology, advanced analytics, cross-industry data, and deep expertise, we provide clarity that helps almost 7,000 of the world’s leading brands and retailers take action and unlock business growth. We understand more about the complete consumer, the complete store, and the complete wallet so our clients can go beyond the data to apply insights, ignite innovation, meet consumer demand, and outpace the competition. Learn more at circana.com.
By Nick Mihalopoulos Controller ALC Finance
It was 1984, and Tina Turner had just released her smash hit, “What’s Love Got to Do With It?” At this time, the U.S. was also exiting a period now known as The Great Inflation. During this period from the mid-60s to the early 80s, inflation peaked at more than 14% in 1980. The Vietnam War, increased government spending on social programs, and energy shortages all contributed to the Great Inflation. Now, fast forward 40 years to 2024, and we are exiting another period of high inflation, which peaked at 9.1% in June 2022 and is now down to 2.9% as of July 2024.
Equity markets are celebrating inflation being back down below 3%, but consumers still haven’t been able to find relief. This is in large part due to the fact that prices of essential items, such as those found in grocery stores, have increased by 20% over the last four years. So, what’s transportation got to do with this 20% increase? According to the Cass Truckload Linehaul Index, truckload transportation rates have increased by 5.9% over the last four years and have decreased by 23% from their peak in May 2022. Since transportation doesn’t queue up Tina Turner’s hit song, we’ll need to look at other costs. For example, the average grocery store hourly wages over the last four years have increased by 26.5% from $16.98/hr to $21.48/hr. This outpaces the 19.4% wage increase of all employees during this time period.
Given this data, the current prices of grocery store items and other goods are here to stay. The positive in this data is that wage growth has kept up with these price increases, but like in any economy, workers in some sectors have seen higher increases than others. Inflation and grocery store prices have become major headlines as we near the November election. Both parties are making their case to the American people as to how their platform will better benefit the economy and stave off future inflationary periods. And if 1984 happens to be on the minds of party leaders, let’s hope they’re listening to Tina Turner and not reading George Orwell.
*****
Nick Mihalopoulos began his career with the Allen Lund Company in 2011 after previously working at PepsiCo. Mihalopoulos is a graduate of the University of Illinois Urbana-Champaign where he earned a dual degree in Finance and Accountancy.
nick.mihalopoulos@allenlund.com
During the past four years inflation has battered consumers, and a Rabobank analysis says U.S. consumers have finally hit the wall.
In a report on the cost of a Fourth of July barbecue, Rabobank analysts said consumers are trading down and eating out less often in response to long-running inflation.
“The consumer is waving the white flag on food inflation,” Tom Bailey, senior consumer foods analyst at Rabobank, said in a news release. “With an added 2% in price hikes in 2024 coupled with the cost disparity between dining out and cooking at home at its widest margin in history, we’re seeing heightened fatigue and frugality.”
The 2024 Rabobank BBQ Index, which measures the cost of staple ingredients for a 10-person barbecue, shows that it will cost $99 to host a cookout on the Fourth of July this year, up from $97 last year and $73 in 2018. Cookout ingredients are 32% higher food costs in 2024 compared with 2019, according to Rabobank.
The index showed that the average U.S. consumer has to work an hour to earn enough money for a six-pack of beer and a burger in 2024, up from 51 minutes in 2019, and they’ll have to work nine hours to pay for a barbecue this year, up 32% since 2019.
Produce prices for the BBQ Index are mostly tame compared with a year ago, Rabobank economists said. California’s drought in 2023 sent lettuce prices to more than $100 a carton, well above the average range of $15 to $20 per carton. Rabobank analysts said lettuce prices have come down significantly in 2024.
“We expect leafy greens to have steady supplies, good quality and decent prices,” Rabobank economists said in the release.
Potatoes, also hit hard by drought last year, have rebounded with greater supply based on expanded acreage harvested in the fall of 2023. Potato prices are about half of year-ago levels, the index showed.
On the other side of the ledger, Rabobank analysts said tomato prices have moved higher in 2024 as dry weather in Mexico has curtailed production and overall availability.
Rabobank analysts said a reported 68% of people polled by Vericast say they are switching from restaurants — where the tab is up 4.4% annually — to grocery stores, which have seen only a 1.1% price.
Consumers are pulling back all purchases because of tight budgets, Rabobank officials said. Retail sales were weaker than expected in May as higher borrowing rates and inflation discouraged purchase decisions, Rabobank economists said.
“Retail sales will likely remain soft throughout 2024,” Bailey said.
Wages have not kept up with inflation. Credit card debt, on average, sits at $10,479 per household in the U.S., up from $8,763 in 2021. Forty-one percent of Americans polled by WalletHub say they have more credit card debt now than they did 12 months ago, the release said.
Government aid, such as Supplemental Nutrition Assistance Program emergency payments, the child tax credit, increased unemployment benefits and a suspension of student loan payments have ended, the release said. People under the age of 35 have been hit the hardest; credit card delinquencies in this demographic are at their highest level since 2011, according to the Federal Reserve.
“Fiscal fitness is now more of a focus,” Bailey said. “Saddled with mounting credit card debt, waning savings, and lower real income, consumers are spending less.”
Avocado prices have fallen sharply over the past month due to an oversupply of Peruvian avocado. The decline is spurred by fears of recession impacting the consumption of relatively expensive food products, according to agriculture commodities data group Tridge.
Tridge data reveals wholesale prices of avocado in Mexico dropped by 47% month-on-month, and avocado prices in the U.S. also fell by 27% month-on-month.
Colombian avocado prices also fell by 39% month-on-month.
“The price downturn is due mainly to oversupply,” Tridge reported.
“Peru has been increasing avocado export by 25% every year for almost five years, and this year, its export volume has increased by 30%.”
There is an “avocado disaster” in Europe because of oversupplies, and U.S. and Asian markets are starting to exhibit similar market reactions.
Additionally, some avocado market participants observe consumption of avocados is falling because people are buying fewer avocados while high inflation and recession affect household income. In some countries, avocados are sold lower than the farmgate price, Tridge reported.
Retail food price increases are expected to remain low at supermarkets and food stores for 2020, according to the latest USDA’s Economic Research Service Food Price report. Inflation is expected to be in a range from 0.5 to 1.5 percent.
That, the agency said, would make 2019 the fourth straight year of deflating or lower-than-average food inflation at retail. Over the past 20 years, retail food inflation has averaged about 2 percent per year.
Commodities with lower prices this year, range from poultry, to eggs, fats and oils, and fresh fruits. On the other hand, fresh vegetables in 2019 are projected to increase at inflation rates greater than the 20-historical average.
For the year 2021, USDA economists predict low retail food inflation will continue.
“In 2020, food-at-home prices are expected to increase in a range between 0.5 percent and 1.5 percent, as potentially the fifth year in a row with deflating or lower-than-average inflating retail food prices,” the agency said.
Retail fresh fruit inflation is forecast at -1.5 to -0.5 percent in 2019 and 1 to 2 percent in 2020. Retail fresh vegetable prices are pegged to jump 3 to 4 percent in 2019, but change just zero to 1 percent in 2020.
Restaurant food prices have increased at a faster rate than supermarket food in recent years; the USDA projects food-away-from-home inflation at 2 to 3 percent for both 2019 and 2020.
Price inflation has slowed to a crawl in 2015 for retail fresh produce.
Little or no inflation this year is expected for retail fresh fruit prices, while the top end of retail fresh vegetable price inflation is just 1.5%.
The USDA’s Economic Research Service reported in late July that the agency’s updated forecast for retail price inflation for fruit is now in a range 0% to 1% for 2015, rising to 2.5% to 3.5% next year. For fresh vegetables, the USDA predicts retail prices will increase from 0.5% to 1.5% and rising 2% to 3% next year.
Retail price inflation for fresh fruits in 2014 was 4.8%, while fresh vegetable retail prices were off 1.3% compared with 2013. The 20-year average inflation rate for retail fresh fruits is 3% and 3.2% for vegetables.
Fresh produce prices will increase at a lower rate than the overall food price index. The agency predicts overall supermarket food prices will increase 1.75% to 2.75% this year, with higher inflation for beef and eggs. In 2016, the USDA predicts retail food prices will increase from 2% to 3%, in line with the 20-year average of 2.6%.
Though the California drought has not caused fresh produce inflation this year, the USDA said it could play a role in food prices next year.
“The ongoing drought in California could have large and lasting effects on fruit, vegetable, dairy, and egg prices,” the USDA said in the forecast. On the other hand, the agency said lower trending oil prices could cause lower production and transportation costs to be passed on to consumers.
The USDA said farm-level prices for growers are down compared with a year ago. The agency predicts farm level prices for vegetables will decline 4% to 5% this year, while farm-level fruit prices will sink between 5% and 6%. For 2016, the USDA predicts grower prices for fresh fruits will rise 1.5% to 2.5%, while grower prices for fresh vegetables will increase 1% to 2%.
Fresh produce prices will increase 3.5% to 4.5% due to inflation this year, according to the latest USDA retail price forecast.
That compares to 2% price drop in 2012 for all fresh produce.
The Economic Research Service, a part of the USDA, report retail fresh fruit prices for 2013 are predicted to rise 3% to 4% in 2013, after 1% inflation in 2012 and 3.3% higher prices in 2011. With fresh fruit prices decreasing .5% in April, the USDA reported the fresh fruit index is up 1.4% from the same time a year ago.
The Department of Commerce in April reported the average retail price per pound of red delicious apples was $1.33 per pound, up seven cents per pound from April 2012. Retail navel orange prices were 98 cents per pound in April, up from 91 cents per pound the same time a year ago. Retail banana prices, at 60 cents per pound in April, were unchanged from a year ago.
Fresh vegetable retail prices are predicted to rise from 4% to 5% in 2013, after a 5.1% decline in retail prices in 2012 and a 5.6% gain in 2011.
The fresh vegetable index dropped 2.7% in April, but prices were still up 4.6% compared with the same time in 2012. The average retail price of tomatoes in April was $1.46 per pound, up from $1.39 per pound in April 2012.
The consumer price of all food consumed at home in 2013 is forecast to climb 2.5% to 3.5%, the same forecast range as food consumed away from home.
Fresh fruit and vegetable retail prices in 2012 were generally lower, according to a recently released government report.
The U.S. Department of Agriculture’s Economic Research Service reports lower fruit and vegetable prices resulting in overall retail prices for food being kept in line through October this year.
From January through October , average food-at-home prices have been flat because deflation in the fresh fruit and vegetable arena and lower prices for milk and pork, the USDA ERS said in a food price outlook report issued in late November. By contrast, beef, veal, poultry, fat and oil prices have been higher.
The inflation forecast for both all food and food-at-home prices in 2012 is 2.5 to 3.5 percent. Lower prices were particularly pronounced for vegetables in 2012, according to the USDA ERS.
The fresh vegetable consumer price index increased 0.6 percent, however it has dropped about every month in 2012. Compared with 2011 year ago, fresh vegetable prices are down 3.2 percent on average, due primarily by a 10.9 percent drop in potato prices, a 4.1 oercent decline in lettuce and a 1.7 percent slide in tomato prices. Other fresh vegetable prices were down 0.7 percent.
Warmer weather and favorable growing conditions in 2012 combined to increase yield and lower prices compared with year-ago levels.
An expected seasonal increase in prices during the second half of 2012 has been less than predicted, and because of that the USDA now expects fresh vegetable prices to fall 4 percent to 5 percent in 2012. The fresh fruit price index is up 2.1 percent from October 2011, and the USDA projected fresh fruit prices for 2012 are now projected to fall between 1 percent and 2 percent.
Compared with October 2011, the USDA said retail apple prices are up 6.4 percent, with banana prices 1.4 percent lower, citrus prices 0.1 percent higher and other fresh fruit commodities up 1.3 percent in retail price.
Prices increases overall of 3 to 4 percent for fresh produce is projected in 2013 by the USDA. The agency sees an increase of 3 to to 4 percent for fresh fruit and 4 to 5 percent for fresh vegetables.
Overall food price inflation for 2013 is projected between 3 and 4 percent. Prices for food served away from home are projected to increase 2.5 to 3.5 percent in 2013, while prices for food served at home are expected to increase 3 to 4 percent.