business news in context, analysis with attitude

The Los Angeles Times has an excellent story about how Southern Californians are strategizing to save money at the grocery store.

First, some context for their decision-making:

"The U.S. is not in a recession, but the psychological weight of that possibility — combined with the effects of still-high inflation — have consumers bracing for the fallout and strategizing to save money.

"Their first move? For many shoppers, it’s rethinking how they buy groceries."

The fact is, "Consumer packaged goods have experienced an average inflation rate of 11% over the past year, according to recent data from market analytics firm NIQ (NielsenIQ), and many shoppers have reached a breaking point. Some are switching supermarkets or eschewing brand-name products that come with a higher price tag, while others have reallocated where they spend their dollars altogether.

The Times goes on:

"Consumers right now are using 'a multipronged approach to try to make ends meet,' said Carman Allison, a vice president at NIQ. Allison worked on a survey tracking shopping behaviors and retail trends in the first quarter of 2023 and found that consumers 'are making some discretionary tradeoffs.'

"Thirty-five percent of survey respondents said they 'only buy the essentials' at the grocery store, a figure up by 3 points since October. Thirty-one percent of respondents said they were buying 'less expensive alternatives' to the items they typically purchase, and 38% said they 'buy store-brand products' to keep costs down.

"Allison noted that private label goods have seen a gradual uptick in popularity quarter after quarter, driven by high inflation categories such as pet care and dairy. Private label goods, or store brands, are products manufactured specifically for a retailer and sold under the retailer’s own name. Most are sold at a lower price point than a similar product from a well-known national brand."

KC's View:

What I found really interesting about this story is the following passage:

"Americans are now spending more on dining out than groceries. In April, spending at restaurants and bars was up 9.4% from 12 months earlier, according to monthly retail data from the U.S. Census Bureau. And restaurant spending is up around 40% from four years ago."

In other words, they're strategizing about their supermarket purchases, but then are either going out to eat or ordering take-out from restaurants because somehow they've been persuaded that this is equal to or cheaper than cooking for themselves.

I don't care how many leftovers you can get out of a restaurant meal, the broader value one gets from cooking and eating at home is better - but, to a great degree, supermarkets are not telling that story effectively.

When we were mid-pandemic, and restaurants' market share was in free fall, I argued that this was a moment at which supermarkets should strengthen their hold on consumer food dollars by raising their games and focusing relentlessly on a compelling narrative.  Sure, a percentage of those dollars would return to restaurants when the pandemic receded.  But it didn't have to be all of them.