Grocery prices may be dropping, but consumers continue to hold back on volume
The Consumer Price Index for food consumed at home may have inched down 0.3% on a seasonally adjusted basis in March compared to February, according to the Bureau of Labor Statistics, but the average price per unit across all foods and beverages and channels for the month was still up 9.8% year-over-year and 27.4% from March 2020, according to Circana data released yesterday.
In addition, the higher year-over-year prices may feel more significant given “salaries are not keeping pace” – prompting consumers to “move around dollars between channels, products and brands” as they seek to balance their money and nutrition goals, Jonna Parker, Fresh team lead at Circana notes in analysis by 210 Analytics President Anne-Marie Roerink, published yesterday.
“That means continued unit and volume pressure for most departments as people skipper between sales promotions, channels and categories to balance their budgets,” Roerink added.
Pulling from a Circana survey conducted in March, Roerink noted a whopping 94% of shoppers said they are concerned about the price increases, which she suggests is particularly hard-hitting for lower-income consumers.
She explained in the report, “the US Government Accountability Office reported that low-income households spend an average of 30% of their total income on food,” consuming an estimated 79.8% of all meals at home compared to 74.2% for those making $100,000 or more annually, per March Circana survey data.
This makes them valuable consumers for brands and retailers, but also among those most likely to look for deals and budget-balancing strategies.
Private label gains sales
An increasingly popular strategy for stretching grocery budgets is trading down to store brands, which Roerink noted increased record, double-digits in 2022.
While this growth would appear to be a “tough act to follow,” Roerink added private brands continued to grow in the first quarter of 2023 with dollar sales climbing 10.3% across items and channels – double that of national brands, which saw dollar sales grow 5.6% in the same period.
“Double-digit gains in store-brand sales included several fresh departments, including bakery (+17%), refrigerated (+15.5%) and deli-prepared (+12.4%),” noted Roerink.
Despite these gains, Roerink said, branded manufacturers continued to hold their own and capture the bulk of sales across all three categories, including 57% of bakery sales, 71% of deli sales and 57% of dairy sales.
Units, volume drop across category
Even though sales are up across nearly all categories fueled in part by higher prices to offset inflation, volume and units continue to drop across all departments as consumers buy less to save more.
“The heavy inflation in eggs, cheese, butter, etc, boosted sales for the dairy department by 13.4% to reach $7b in March 2023. The deli and bakery departments also achieved dollar gains” of 5.9% and 10.4% respectively, with meat, produce and seafood all falling 0.6%, 0.2% and 2%, respectively, Roerink reports.
“On the unit side, all departments were down, with seafood experiencing the highest losses, at -4.5%,” she added.
There were a few bright spots for unit growth, which likely reflects shifts away from food service, as in the case of deli prepared pizza, which was up 8.2% in March from a year ago, or a desire for affordable indulgence, as in the case of cookies, which were up 9.8% in March compared to the same time last year.
Roerink also note growth for peanut butter, jelly and white bread, suggesting, “the PB&J to the rescue” as an affordable, easy meal.
Could stronger fruit sales suggest a brighter future?
An uptick in volume for fruit sales in March suggests a delayed benefit from lower prices could be on the way for other categories as well.
Roerink notes a drop in fruit prices in February resulted in volume holding flat, but volume sales improved slightly in March.
“This underscores the market delay in demand strengthening when prices come down,” she said.