ARLINGTON, VA. โ While consumers remain concerned about high food costs, at home food prices and away from home food prices are nearly as affordable as they were in January 2020.
Leo Feler, PhD, chief economist at data insights firm Numerator, analyzed data from the US Bureau of Labor Statistics and the Consumer Price Index (CPI) and found that consumer incomes increased almost as much as CPI food prices between January 2020 and December of last year. At home and away from home food costs rose, on aggregate, 25% during the period, and personal income increased an average of 24% over the same time.
โWe understand the frustration that consumers are experiencing, and we understand a lot of the political dialogue thatโs happening, but thatโs referring to this period in 2022 when there was this really big gap between food at home prices and how income had grown to catch up,โ Feler said in a webinar held by FMI-The Food Industry Association. โThe real story is that food has become about 1% less affordable than it was in January of 2020.โ
Cereals and bakery products decreased the most in affordability since January 2020, rising 28.9% in CPI, along with nonalcoholic beverages and beverage materials (26.8%) and meats, poultry, fish and eggs (26.4%). Fruits and vegetables grew the most in affordability with a 17.3% CPI increase during the period, followed by dairy and related products at 20.5%.
โThese past several months have actually led us to be back on the similar trends that we were at, of how quickly food prices are increasing, as we were right before the pandemic,โ Feler said. โThe price level is higher, and we donโt expect the price level to come down, because conditions in the economy are pretty positive. What we do expect is that the rate of price increases will stay about the same rate that we had prior to the pandemic.
โConsumers have been able to combat inflation by substituting from more expensive to less expensive products. Even though we might have things like canned fruits and vegetables that have become more expensive, we also have fresh vegetables that have become more affordable. We also have citrus fruits, apples, bananas, lettuce, potatoes that all have become more affordable. So, consumers still have a lot of optionality in being able to have a balanced diet because theyโre able to switch from products that have become less affordable to products that have become more affordable.โ
Despite affordability reaching near pre-pandemic levels, consumers still name grocery costs as one of their top concerns, according to recent data from FMI. Consumer spending on weekly groceries has reached an average of $165 per household, up from $121 in 2020, and shoppers are employing a variety of techniques to save money. Over 50% of consumers report hunting for deals as a popular cost-cutting strategy, along with buying more private brands (41%), buying fewer items (32%) and buying in bulk (23%). More shoppers also are comparing unit pricing, such as per ounce, between different grocery stores than previously. Gen Z and millennial shoppers are the most likely demographics to compare unit prices, with at least 70% of both groups comparing price points across products in a single store and across products between stores.
โGiven the impact of inflation on food prices over the last few years, weโve seen a shift in consumer behaviors to address these prices,โ said Steve Markenson, vice president of research and insights at FMI. โPerhaps the biggest change weโve seen is shoppersโ evolving notions of what constitutes value. While traditionally thought of as a straight price-to-quantity ratio, the notion of value among the modern grocery shopper is a much more nuanced matrix that combines convenience, experience, relevance and quality into the equation along with price and sheer volume.โ
