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VOLUMES ARE DOWN, BUT CONSUMPTION ISN’T

New research by Circana shows shoppers are adopting a variety of strategies to beat inflation.

A new report from Chicago-based market research firm Circana, formerly IRI and The NPD Group, reveals that although food and beverage volume at retail continues to decline (even in the face of moderating inflation), consumption does not. But not all of that volume is shifting to foodservice, which is facing its own inflationary pressures. In fact, food away from home prices jumped 7.5% from July 2022 to July 2023 while CPG food inflation rose only 4.9% — though it’s up an aver- age of 20% from 2019. Combine that with nearly $17 trillion in household debt (approximately 10% of disposable income), the recent elimination of $23 billion in annual SNAP benefits, and the resumption of student loan payments, and it’s no surprise that 94% of consumers are concerned about the cost of food, according to Circana. So how are they able to eat as much as before?

Cash-strapped consumers are shopping sales, cutting back on non-essentials and trading down to less expensive brands. But they’re still not willing to sacrifice convenience — good news for frozen meals.

Total basket spend per trip in July 2023 was up only 0.5% compared with July 2022 — way less than the rate of price inflation.

Foodservice volume is increasing somewhat year- over-year, reports Circana, but growth is uneven (QSRs and breakfast-focused formats are outperforming FSRs and lunch- and dinner-focused formats). And with 14% of meals sourced from foodservice at the end of 2022, the channel still hasn’t gotten back to its pre-pandemic share of 16%. Plus, foodservice costs are more than four times the cost of eating at home, and the absolute dollar gap is widening, according to Circana.

To make ends meet without actually reducing consumption, consumers have adopted a wide variety of new shopping behaviors, with 84% reporting one or more changes (up 2% from June). Looking for sales is the most popular strategy (employed by 53% of shoppers), followed by cutting back on non-essentials (46%), using up fresh foods before they go bad (41%) and using leftovers more (39%). Another 31% of shop- pers say they are switching to lower cost brands more often, especially store brands, while an equal number are looking for coupons more often. In addition, the U.S. Census Bureau reports that the number of households sourcing meals from food banks rose 15% in April 2023 versus the previous April.

One thing consumers are not ready to give up is convenience. Dinners characterized as no-prep, fast-fix and one-dish are all on the rise, while those described as “invested” and time-intensive are becoming less common. In-home meals are also being prepared with fewer ingredients versus a year ago (-5%). That’s good news for the frozen department, including categories such as frozen poultry and meat, frozen pizza and frozen sandwiches, all of which have seen their share of occasions rise during the past year, according to Circana.

Interestingly, the company’s research found that consumers are making an average of 10 more trips for food and beverages annually than they were two years ago, but they’re narrowing the number of channels they shop — and basket sizes (in units) are down. Total basket spend per trip in July 2023 was up only 0.5% compared with July 2022 — way less than the rate of price inflation.

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