Americans Believe Food Inflation Is Higher Than Reality
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Americans Believe Food Inflation Is Higher Than Reality

Posted on Wednesday, October 12th, 2022 at 7:00 am
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Americans believe that food-at-home inflation has hit 22.8%, 9.7 points higher than the 13.1% annual rate reported by the U.S. Bureau of Labor Statistics, according to the latest dunnhumby Consumer Trends Tracker (CTT) released on October 3, 2022. The perceived rate of food inflation is 5.1 percent higher than the dunnhumby Consumer Pulse report from February 2022, just after Ukraine was invaded.

The dunnhumby study also found that the impact of food inflation varies widely by geography and demographics. The CTT is part of the dunnhumby Quarterly, a strategic market analysis of key retail themes, with the second edition being focused on inflation.

“Seven months ago we first reported on the dispatch between consumer sentiment and reality regarding food inflation. We now see it’s at the highest point to date, and we are also seeing that consumers are responding by changing their shopping behavior, and perhaps most troublingly, nearly a third are cutting back or completely eliminating some meals,” said Grant Steadman, President for North America at dunnhumby. “While there are signs in parts of the economy that inflation may be dampening, that has not occurred yet for food. Retailers and manufacturers need to ensure that they are putting their customers first when they are making decisions about how to respond to persistent inflationary cost pressures.”

Key findings from the study:

An overwhelming majority of consumers are struggling financially. Sixty-four percent of U.S. consumers report they would have difficulty covering an unexpected expense of $400 or more compared to 60% in April-May 2022. The study found a wide range of financial insecurity with a low of 42% in Wisconsin, followed by 48% in Maryland and 52% in Washington, to a high of 77% in Louisiana and Oklahoma.

Food insecurity is on the rise across the country. Fifty-five percent of consumers surveyed report they are not getting enough of the food they want to eat, and 18% are not getting enough to eat. In addition, 31% of households have skipped or reduced the size of their meals in the last 12 month because there wasn’t enough food, a 5% increase since the last CTT survey in May-June 2022.

Seventy-five percent of consumers want retailers to provide consistent prices. Low base prices are also important across all incomes, even among affluent shoppers. Seventy-three percent of households with incomes above $100,000 reported that low base prices are important, an increase of 7%. Shopping at stores with low base prices is the most common shopper behavior with 59% of those surveyed reporting they do this most of the time.

Consumers are shifting a significant share of their spending to dollar stores, at the expense of speciality / premium stores. Since April-May 2022, dollar stores’ share of wallet has increased 2.1% (17.8% to 19.9%) while speciality / premium stores has decreased 1.1% (18.7% to 17.6%). eCommerce channel penetration has also decreased sensitivity to cost. Between October 2021 and July 2022, there’s been approximately a 20% increase in people citing additional fees (eg. delivery and picking fees) as a barrier to buying groceries online.

Consumers are trading down in categories. Eighty-three percent of respondents are looking for cheeper alternatives to the products they usually buy in at least one category. The top three categories consumers are trading down in are packaged food (53%), common household products (52%), and frozen food (42%).

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