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The University of Michigan Consumer Sentiment Index soared 14% in December 2024, reaching its highest point since July. The university attributed the sharp increase to consumers believing inflation will slow further and the economy will improve in the near term. The Index rose across the population, including all ages, income levels, education levels and regions of the country. Sentiment is now just shy of the midpoint between the pre-pandemic reading and the historic low reached in June 2022.

Price per unit in the frozen department averaged $5.30 in December — 0.1% less than December 2023 but 16.0% higher than December 2021.

With more than two-thirds of the U.S. economy fueled by consumer spending, this rising optimism tends to translate into greater spending. This was certainly reflected in post-Thanksgiving-through-end-of- year shopping patterns. A Circana survey of primary shoppers found that 54% got restaurant takeout in December and 51% dined at restaurants — among the highest shares in years. At retail, both total and food and beverage dollar sales gained 2.1% in December, though unit sales were flat. Fresh perimeter increased sales by 3.5% with units up 0.4% over December 2023. However, it is important to note that December sales reporting went through Dec. 31 in 2023 and Dec. 29, 2024, which may have moved some New Year’s meal dollars into the January 2025 report.

Last year ended up being a strong year for grocery retailers, with total food and beverage sales reaching $922 billion. Sales rose 3.0% in dollars and 1.3% in units. Everyday demand was strong due to consumers purchasing restaurant food less often while cooking more in an effort to save money. Holidays and special occasions remained a time when consumers splurged a bit more, prompting new records for many of the big national holidays.

INFLATION INSIGHTS

In December 2024 (the four weeks ending Dec. 29), price per unit across all foods and beverages in the Circana MULO+ universe stood at $4.35. This reflects an increase of 2.3% over December 2023. Fresh food prices averaged $4.45, which was an increase of 3.1% over December 2023. The upswing in December prices was influenced by substantial inflation in eggs, beef and other areas. Center store prices averaged $3.93, an increase of 2.1% over December 2023. Compared to the pre-pandemic baseline, the average price per unit of $4.35 is 42.2% higher than the 2019 average of $3.13.

The average price per unit across all items in the frozen food department was mostly flat in December as in all of 2024. However, comparing today’s prices to those seen three years ago reveals the cumulative impact of inflation and the subsequent pressure on income for consumers. Fresh fruit and vegetables experienced decreased prices in December.

Frozen food assortment was below average in December, at an average of 1,174 items per store per week. In comparison, the 2019 average was 1,325 items.

A DEEP-DIVE INTO FROZEN SALES

The frozen food department enjoys very high household penetration, with 98.7% purchasing frozen items at least once a year. The big driver of improved sales this year lies in trips. While the number of households purchasing frozen food was unchanged, the number of times they bought from the frozen food department increased 3.3% in 2024 to 50 trips per year — nearly once a week. While they spent a little less per trip, [annual] spend per buyer rose 1.6% to nearly $700.

‘While the number of households purchasing frozen food was unchanged, the number of times they bought from the frozen food department increased 3.3% in 2024 to 50 trips per year — nearly once a week.’

In the MULO+ universe, frozen food sales for the year totaled $85.5 billion, whereas sales during the four December weeks generated $6.4 billion. It is important to keep in mind that the date cut-off in both years is likely to have impacted the December results. The [four-week periods] always run through a Sunday: Dec. 29 in 2024 and Dec. 31 in 2023. The difference lies in the New Year’s celebration dollars that will mostly shift to the January 2025 report.

Meals and desserts were the largest sellers in December (and all year), but meat and poultry stood out as a driver of growth in 2024. Processed meat and poultry such as sausage and chicken nuggets grew unit sales by 10%. Meat/poultry such as chicken breasts had solid unit gains also, at 2.2%. Frozen fruit and vegetables also had a strong month and a strong year. Despite above-average inflation over the past year, sales increased 2.4% in units in 2024 and 2.9% in dollars.

Looking into frozen fruit and vegetables more closely underscores the strong fruit performance, with healthy dollar and unit gains. On the vegetable side, all things potato continued to drive unit gains. With the better harvest, prices for potato products are decreasing across the store, whether in the produce department, chip aisle or frozen potato set. This is pulling down dollar sales, but unit and volume sales show the popularity of preparing frozen potato products at home.

WHAT’S NEXT?

With New Year’s falling on a Wednesday in 2024, it is likely that some of the holiday’s substantial sales moved into January. New Year’s resolutions typically affect January sales patterns as well. A host of surveys revealed the typical themes of saving money, prioritizing self-care, eating healthier and exercising more.

Stressing the economic advantage of home-cooked meals can be a way for grocery retailers to address consumers’ desire to save money in the new year. Affordability is a strong suit for frozen food, and prepared meals and ingredients can help deliver the home-cooked advantage while saving some time and money.

Consumers are increasingly seeking balance in physical health and emotional well-being. On one hand, they seek to understand more about nutrients along with their functional benefits. They appreciate on-pack callouts and healthy recipe suggestions. On the other, self-care is fueling demand for everyday indulgence, whether some ice cream or frozen waffles to begin the day.

‘Stressing the economic advantage of home-cooked meals can be a way for grocery retailers to address consumers’ desire to save money in the new year.’

Shopping and sales patterns in the first quarter of 2025 are likely to resemble those of the latter half of 2024. Consumers remain hyper-focused on price and promotions, shopping more often and including more channels. Every-day-low-price formats have been gaining share, making promotional reach for high-low formats more important.

—Anne-Marie Roerink is founder and principal of San Antonio-based market research firm 210 Analytics. She can be reached at [email protected].