Consumers expect to pay more for holiday meals, continue seeking convenience from grocery retailers

By Deniz Ataman

- Last updated on GMT

Image source: Getty/AleksandarNakic
Image source: Getty/AleksandarNakic

Related tags holidays Food price inflation convenience Economics

Thanksgiving retail is expected to see a more judicious consumer who expects to pay more this year and will seek more deals while retailers can expand food service departments with semi and fully-prepared meals to complement the majority of consumers who cook at home, according to holiday data from both FMI – The Food Industry Association and Circana.

In 2022, Thanksgiving food shopping contributed $2.8bn in sales compared to the average week and was surpassed by Christmas food sales of $6.2bn, with 79% of the sales growth taking place in the week before and week of Thanksgiving, Circana reported in its Thanksgiving Tracker report​.

This year 34% of consumers anticipate paying more for their Thanksgiving groceries and will purchase the same amount as last year, although promotions will influence their purchasing decisions. In 2022, promotions drove the Thanksgiving basket by almost 50%, but the average depth of discount was nearly the same throughout the year.

Consumers are expected to shop for discounts and promotions to stretch their budget with 34% reporting they will be looking for deals and making spot purchases of specific items on sale or with a coupon.

The report found that 77% and 34% of consumers will rely on more homemade and fresh-prepared foods for Thanksgiving, respectively; while 72% of consumers bought takeout Thanksgiving meals from a restaurant versus 28% who dined in.

Based on consumer concern around food prices, shoppers are expected to make several trips during the week before and of Thanksgiving and retailers can maximize these purchase behaviors by featuring add-ons across the store versus in one department, as well as enhancing its food service department to complement shoppers’ desires to cook at home.

Economic uncertainty is leading to a more “prudent and tactical” shopper

According to a USDA food prices and spending report​, the average cost of groceries increased by 11.4% in 2022 from 2021 compared to the historical level of retail food price inflation of 2.0% per year.

During FMI's Holiday Grocery Trends & The Value of Americans’ Grocery Dollar webinar, Ricky Volpe, former USDA economist and Ph.D. candidate, agribusiness, California Polytechnic State University, said expects “a lot of uncertainty going into 2024” that will impact food prices due to external factors around global conflict, severe weather events and international commodity trade, among others.

Citing the USDA Economic Research Service forecast, retail food prices are expected to fall in between 5.5% or increase up to 7.8%, and “both of these would be at or near historic extremes in terms of deflation or inflation,” Volpe explained.

Major farm and wholesale prices forecasted in the Producer Price Index are expected to decrease, “which reflects a major pullback on inflationary pressures,” he said.

As a result of these economic pressures, Leslie Sarasin, president and CEO of FMI, referred to FMI's Grocery Shopping Trends, Holiday Season report​, elaborating further on a more sensible consumer this holiday season who will most likely make several grocery trips to purchase food items when needed.

“The data indicates that combined with consumer concern around food prices, shoppers are being prudent and tactical with their purchases to stay within their budgets and are more prone to just-in-time shopping rather than loading up their carts as we have seen previously when they were much more worried about supply and out of stock concerns,” she said.

Ultimately, consumers across the board will continue to focus on cutting back on how much food they buy, focusing on necessities and promotions – which also underscores continued popularity of private label products that provide both quality and value for shoppers.

Yet, 39% of consumers said their finances have worsened in the last year, strengthening their resolve to look for deals and ultimately impacting the number of trips they take to grocery stores.

“Just 34% of the shoppers say they're very excited to celebrate Thanksgiving, that’s down from 38% … this reduced excitement may also explain why some consumers anticipate being less proactive for their holiday food shopping this year,” explained Steve Markenson, VP research insights, FMI.

This year, 31% shoppers plan to shop in advance, which is down from 37% last year, highlighting a less proactive shopping plan.

Despite consumers' financial concerns, 35% say they are optimistic that their household finances will be better in the coming year, compared to 24% who are less optimistic, Markenson said.

Hybrid meals create an opportunity for retailers to expand food service departments

Although price strains have impacted consumer dining habits, cooking at home has positively impacted consumers health, with 27% reporting their diet and nutrition have improved in the last year and 52% of shoppers intending to cook more meals at home in the next year.

Further, a majority of shoppers (60%) cook dinner at home five times a week, creating a hybrid meal, which includes semi or fully prepared meals from the grocery store.

In 2023, hybrid meals for dinner increased to 51% compared to 48% in 2022, which has also impacted meals consumed at restaurants, with 52% of shoppers saying that grocery store prepared foods offer a better value than eating out or ordering takeout explained Rick Stein, VP, fresh foods, FMI.

“The shift to preparing meals at home particularly in this hybrid method has also cut into consumption of restaurant meals. Shoppers (25%) report an increase in their purchase of food service at a retail from grocery stores and relatively flat purchases from quick service and fast casual restaurants,” he said.

Stein continued, “It’s clear that shoppers increasingly appreciate the convenience and value that food service and a grocery store offers, whether it be to help round out the home cooked meal with freshly made sides or supplying an entire meal that customers can eat at home, which is cheaper than food at restaurants.”

For retailers, this shift is a “renaissance moment” in food service departments where retailers are investing heavily in developing a chef specialty staff, increasing space allocation, and expanding variety ‘in an effort to re-energize food service departments and make them more top of mind for consumers,” Stein explained.

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