Inflation Continues To Impact Consumer Food Choices
Consumer spending for at-home food remains strong, but shoppers continue to augment their shopping patterns in an effort to save money as they face high prices in key categories, results from a new IRI report show.
In its Impact of Inflation on Consumer Behavior report, IRI said at-home food and beverage inflation was up 13.2% in the fourth quarter of 2022 compared to the same quarter of 2021. Although consumption levels continue to soften, at-home food spending remains strong. In Q4, center store sales were up 11.1% and perimeter sales grew 6.3%.
“The CPG space has proven to be less volatile and more resilient during economic downturns than other sectors,” said Alastair Steel, executive, Client Engagement, IRI. “However, shoppers are feeling the impact of high prices and are shying away from discretionary purchases. Multiple tactics are being used to reduce spend and manage budgets, with value channels performing well.”
IRI noted prices throughout the store are rising at varied levels. For example, inflation in the alcohol category was up 5.4% in Q4 2022 versus Q4 2021, while fresh meat and seafood were up 3.4%. Bakery and dairy experienced larger increases, up 18% and 23.2%, respectively. Center store inflation remains elevated at 15.3% in Q4 2022, while inflation is coming down in the perimeter departments (7.5% in Q4 2022).
As a result of higher prices, private label promotions continue to rise while premium purchases have slowed. The IRI report noted that private label products are gaining share in 75% of all food and beverage categories.
Premium growth is slowing down as trade down behavior increases, with premium food and beverage brands losing 0.6 share points for the 12 weeks ending Nov. 27, 2022. However, pockets of growth remain for premium products, including beverage alcohol and energy drinks.
Additionally, multifunctionality is having a larger impact on purchase decisions. Shoppers are opting for beverages that offer functional hydration, with energy attributes and health and wellness benefits like electrolytes, vitamins and prebiotics. Authentic, high-quality meals and snacks that are easy to make and provide a better-for-you home cooking and snacking experience are on the rise.
Inflation is also having an impact on where consumers shop. According to the IRI report, the food channel grew at a slower rate than online, dollar stores and the club channels. At the end of January 2023, online grew 16%, the dollar channel grew 14% and the club channel increased by 12% versus a year ago. Comparatively, the food channel only grew by 7%.