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You almost knew it had to come to this. The opening question in the June Biden/Trump debate addressed sharply higher
Grocery prices are moderating from pandemic era increases as consumers demand value for their dollars from grocers and brands.
costs for groceries and housing. Then when the torch was passed to Kamala Harris, she wasted no time proclaiming, “My day one priority is to bring down grocery prices.”
‘My day one priority is to bring down grocery prices.’
Consumer passion for grocery costs is notable. 56% of respondents in Cadent’s 2024 Industry Marketing Spending Study indicated that they feel “strong/extreme pressure” due to higher grocery prices, higher than in any other category.
Consumers’ focus on grocery prices is no surprise since they are purchased frequently, and prices have risen by more than 20% since 2020.
Groceries have become highly political, perhaps exacerbated by our polarized political climate. It has become a one-two punch, one against manufacturers and two against retailers. Harris has announced that we need a federal ban on price gouging, which could mean price controls. We all know how well price controls worked under President Nixon and across more centrally controlled economies. The result typically is shortages, hoarding, the equivalent of bread lines, and the development of black markets. In addition to price gouging being a vague term, Harris also states a desire to set rules to limit excess profits among large companies selling food and groceries. How excess is defined among large companies is undoubtedly arbitrary.
In addition to this powerful stance against manufacturers, FTC Commissioner Lina Khan is planning to investigate supermarkets’ decisions to hike prices and extract profit from everyday Americans at the checkout counter. This was announced during the Department of Justice’s Strike Force meeting on unfair and illegal pricing, established in March by the Biden administration to stop illegal corporate behavior that hikes prices on American families through anticompetitive, unfair, deceptive or fraudulent business practices.
The FTC’s actions are based on past behavior, not current practices, and assume that Americans were not getting the competitive, affordable prices they deserved. It is as if manufacturers and retailers had a crystal ball to predict how much and when costs would rise or fall during the pandemic and its aftermath. Government leaders should be thankful that plants and retailers were up and running and there wasn’t rationing as in other parts of the world.
Manufacturers and retailers are certainly not happy with constant criticism over pricing. They’re even less pleased when the government interferes with market economics, which can result in even higher prices, lower quality, poor service, and other unintended consequences.
Ultimately, it will be up to manufacturers and retailers to work together to solve this problem. Does anyone remember government price controls from the early 1970s and how well they worked? Pricing is also the great democratizer with over half of shoppers across all income levels saying the availability of sales/promotions influences their shopping habits. Everyone loves a deal!
‘It will be up to manufacturers and retailers to work together to solve this problem.’
Shoppers are trading down. The highest growth by product tier is among value and private label brands, with 65% saying they will spend more on value brands and 55% on private label brands. Consumers are also shopping in more “value” channels, including mass merchandisers and dollar stores, in search of savings.
We’ve also identified categories of price sensitivity among consumers.
Highly sensitive (60%+):
Balanced (40-59%):
Limited Influence (<40%):
Refrigerated foods and beverages are generally less sensitive to prices and sales promotions, perhaps due to shorter expiration dates. Frozen/prepared meals are highly price/promotion sensitive but still offer a compelling value compared to dining out.
Based on verbatims from our 2024 survey, consumer reaction to increased promotions and value will continue to be strong. Over half of manufacturers report spending more in 2024 on retail trade promotions, and over 60% said they will spend more in 2025.
Seventy percent of marketing spending is channeled through retailers—traditional promotion, account-specific marketing, or retailer media. Trade promotion elements primarily focus on temporary or ongoing price reductions, accounting for 60% of total trade promotion spending.
Moreover, shoppers clearly favor price over other factors. 69% would rather shop in a store that offers fewer sales but has everyday low prices, while only 41% are willing to pay more for environmentally friendly grocery products. Consumers vote with their wallets.
Don Stuart is a managing partner at Cadent Consulting Group, with offices in Wilton, Conn., and Evanston, Ill. He can be reached at don.stuart@cadentcg.com.
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