From Our Print Edition

Dollar gains and unit losses don’t bode well for the future of supermarkets, so it’s important to keep consumers interested in preparing meals at home.

At its Growth Summit in Las Vegas last month, Chicago-based market research firm Circana reported that annual spending per consumer has jumped $440 to $10,471 per year. The problem is, that 4.4% increase isn’t keeping up with at-home food inflation, which hit 10.2% during the 12 months ending in February. As a result, shoppers have been forced to cut back on purchases, leading to a precipitous decline in unit sales across outlets.

ALARM BELLS GOING OFF

While retailers may not be concerned since they’re still pulling in plenty of dollars, Circana’s Sally Lyons Wyatt, senior vp of client insights, hears alarm bells. “I’m worried,” she says in this month’s cover story. “The underpinnings of dollar gains and unit losses is not good for the industry.” That’s because, eventually, inflation will ease. But who knows whether shoppers who grew accustomed to buying less at the supermarket will return to their old buying habits. Perhaps they’ll take those extra dollars and spend them on something else, such as food away from home. In fact, Circana’s complete-wallet research, which offers 360-degree insights into consumer spending patterns both at and away-from home, suggests that both millennials and Gen Z, which will soon be moving into its prime spending years, already gravitate toward foodservice — both dining out and delivery. Another growing demographic, Hispanic shoppers, also spends more-than-average on foodservice.

As a result, says Wyatt, now is not the time for retailers to take their foot off the gas. They need to do whatever it takes to keep consumers interested in cooking at home (and buying meals components at the supermarket). So don’t make it all about low prices. “That’s one reason the value channel has done so well,” explains Wyatt. “Yes, they emphasize price and value but not at the expense of providing ideas and inspiration.” Do whatever it takes to get shoppers into the store, she continues, but once they’re there, dazzle them with meal ideas, cooking tips and recipes. And leverage social media, which is more powerful than any in-store display or demo when it comes to influencing consumer behavior.

Circana also suggests retailers stay focused on consumer needs as they navigate high food costs in 2023. Although different groups respond in different ways, trading down is a common strategy. “Consumers gravitate to larger pack sizes…for lower price per volume. They’ve also traded down from premium to mainstay and value brands to get as much as possible without spending more,” says Cara Loeys, CPG client engagement principal at Circana. So give them options!

That said, the onset of “frugal fatigue” as consumers grow accustomed to higher food prices means there’s no need to race to the bottom. Last year was all about value pricing, explains Circana food industry advisor David Portalatin. But in 2023, shoppers are looking for other attributes that play into value.

MORE ABOUT CIRCANA IN MAY

Next month, we’ll take a closer look at the newly rebranded Circana and what the merger between IRI and The NPD Group means for retailer and vendor partners hoping to sell more products, more profitably. The May issue will also feature a cover story on our Retailer(s) of the Year! Flip to page 25 to find out who the winners are.