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Trendspotting: Appealing to inflation-focused consumers

By
Craig Levitt, managing editor

Last year, food inflation at retail and foodservice exceeded levels reached during the Great Recession. Even with inflation currently moderating, higher food prices will continue influencing consumers’ spending and eating behaviors this year, according to Circana, formerly IRI and The NPD Group.

At the company’s Growth Summit, held in Las Vegas, March 20-22, Circana food and beverage and foodservice industry analysts said, “When faced with higher prices, consumers will use multiple tactics to reduce or reallocate at- and away-from-home food spending, like trading down to private label, buying in bulk, using more leftovers or choosing a quick service restaurant over a full-service restaurant.”

Food inflation for the 12 months ending February 2023 was 10.2 percent at home and 8.4 percent away from home. Although the rate of away-from-home inflation isn’t as high as at home, foodservice costs are more than four times those of at-home eating occasions, with the absolute dollar gap widening. Higher food costs have had an impact on discretionary spending.

“One of the behaviors consumers have historically used to manage higher food costs is trading down,” said Cara Loeys, principal of CPG client engagement at Circana. “Consumers gravitate to larger pack sizes in the grocery store for a lower price per volume. They’ve also traded from premium to mainstay and value brands to get as much as possible without spending more. These behaviors are a correction from the pandemic when consumers, flushed with cash, purchased premium grocery items.”

However, consumers are likely to get “frugal fatigue” and start to acclimate to the current pricing situation, indicating there is no need to race to the bottom of the price ladder. While 2022 was about value pricing to manage budgets, 2023 will be about the other attributes that play into value.

“Price will always be important, but consumers define value differently. For example, consumers who visit a restaurant aren’t necessarily looking for the cheapest meal,” said David Portalatin, Circana food and foodservice industry advisor. “They’re looking for the menu items they crave or foodservice outlets that offer quality and variety and enable them to treat themselves.”

Portalatin and Loeys expect consumers to manage high food costs in 2023 with the same behaviors, like trading down, shifting to value retail channels, or from full service to fast casual restaurants. They advised the summit audience to stay focused on consumer needs.

A one-size-fits-all approach won't be practical with the various macroeconomic scenarios that may play out in 2023. Income, household composition, lifestyles, ethnic and generational propensities all impact consumer needs and wants. Targeted approaches in delivering convenience and value, innovation, and using digital to alter consumer interaction with brands are ways for food manufacturers, retailers and foodservice operators to win in 2023.

Craig Levitt

Craig Levitt

About Craig Levitt  |  email

When his dreams of becoming a professional hockey player came crashing down due to lack of talent, Craig Levitt turned to journalism. He graduated from Hofstra University in 1992 and has covered various areas of the retail food trade since 1996. Craig joined The Produce News in 2017 and is now managing editor. In his spare time, Craig still plays men’s league hockey (poorly) and enjoys walking the aisles of his favorite supermarket with his wife and two daughters.

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