As higher-income households gain spending power and lower-income shoppers grapple with persistent food inflation, brands face a critical question: How to grow in a K-shaped economy?
A K-shaped economy describes a deeply bifurcated recovery where higher-income households rise along the upward arm of the “K,” while lower-income households fall or stagnate along the lower arm.
An important distinction to note, the divide is driven not just by income, but by wealth, according to Jack O’Leary, director, ecommerce strategic insights at NielsenIQ during a webinar with FMI – The Food Industry Association last week.
This divide shows higher-income consumers benefiting from asset inflation (e.g. homes, stocks). In contrast, lower-income consumers are disproportionately exposed to ongoing price inflation, especially around food.
Half of US spending now comes from 10% of Americans, per Nielsen data. That concentration of spending power is fundamentally altering how brands must think about pricing and growth.
How the k-shaped economy is affecting grocery prices
The consumer price index (CPI) from November 2021 to November 2025 indicate some significant changes between the two income spectrums. CPI measures the average change over time in prices consumers pay for a basket of goods and service. In that period, CPI averaged about 4.5% annually, although many food staples rose faster, according to O’Leary.
A basket of common household food items – such as eggs, milk, bread, ground beef, rice and pasta, among others – increased at an annualized rate of 8.6%, well above overall CPI, according to Nielsen. Some individual staples, notably eggs and certain proteins, increased more than 10% annually.
So, what does this gap mean?
Lower-income households are absorbing vast increases in essential food categories in what O’Leary described as “persistent above-average inflation on the items they need most.” Meanwhile, higher-income households are cushioned by rising asset values and, in some cases, federal tax savings that bolster financial strength.
The result: two very different grocery shopping habits and experiences.
Thrivers vs strugglers: How consumer behavior is splitting
NielsenIQ groups consumers into:
- Strugglers: Consumers experiencing persistent financial insecurity
- Thrivers: Those saving money and experiencing financial security
Strugglers are primarily focused on increasing food prices and the ability to afford basics. In contrast, thrivers, concentrate on long-term investments like savings, childcare and education – while a growing share report having “no concerns,” according to Nielsen.
Spending intentions reflect this divide. Nearly half of strugglers intend to spend less on discretionary categories like dining and entertainment. Whereas, thrivers are far less likely to reduce spending and more likely to increase spending across essentials, including groceries.
For example, in 2034, thrivers were slightly more worried about rising food prices than strugglers. By 2025, that reversed with 17.8% of strugglers citing concern over food price increases, up from 18.4% the year before. Whereas, concern among thrivers dropped from 12.3% to 9.6% in the same time period. Essentially, strugglers became more concerned than thrivers over this period, according to O’Leary.
For brands, this means avoiding planning around the “average” consumer, O’Leary advised.
He noted that brands can no longer assume a uniform consumer since spending power is increasingly concentrated at the top.
Where growth is happening
Actual spend data reveals a key shift, according to Nielsen. Households earning $150,000 or more increased their share of total US spending from 20% to 26%, and their share of food spending from 19% to 24% between 2022 and 2025.
That shift largely came at the expense of lower-income households earning under $50,000, whose share of spending declined over the same period. The widening gap in purchasing power underscores how the K-shaped economy is orienting the distribution of consumer dollars toward higher-income households, according to Nielsen.
A K-shaped economy isn’t just about dollars spent but is determined by what kinds of products households purchase.
Higher-income households drove unit growth in fresh food and prepared meal categories. Lower-income households prioritized shelf-stable products. Nielsen data indicating contracting unit growth meaning that although these items are essential, unit volumes declined, according to Nielsen.
Private label is winning on both ends
One consistent theme across Nielsen’s data shows that private label is resonating across income brackets.
Some of the fastest-growing brands by unit growth included retailer-owned labels, including Costco’s Kirkland Signature and Walmart’s Great Value.
Private brands are no longer just value plays, O’Leary said. Retailers are arranging tiered private label strategies, from entry-level to premium, allowing them to appeal to both arms of the K simultaneously.
“A lot of companies have different levels of private label – better-for-you, organic private label and more basic private label or private brand. That’s kind of a way of getting at the different types of consumers out there in terms of the K,” he said.
As a K-shaped economy restructures grocery demand, CPG brands should avoid strategizing around the “average” shopper. Rather, the secret is in the nuance across tailored messaging, promotions or e-commerce tools like AI that connect to the priorities of each income segment, while keeping an overarching strategy that can work across both ends of the income spectrum, O’Leary noted.
