Americans Feeling the Pain of Rising Food Prices

NEW YORK -- American consumers are suffering from rising food prices, with only 9 percent reporting being able to spend freely, according to Nielsen's Global Survey of Inflation Impact, an international study that surveyed more than 29,000 people from 58 countries in order to understand how respondents around the world of all income ranges are adjusting to rising food prices.

Only 39 percent of Americans report living "comfortably" despite the United States reporting the highest percentage  of households (46 percent) earning annual incomes above $50,000.

"With the global middle class growing by 70 million each year and food prices expected to more than double within 20 years, fast-moving consumer goods (FMCG) companies in many markets are preparing for an unprecedented period of rising demand, economic pressures and aspirationally driven buying behavior," said James Russo, senior vice president, Global Consumer Insights at Nielsen. "FMCG companies focusing solely on consumer income as a barometer of spending habits, however, are unlikely to fulfill their business growth expectations because this is not a middle class-only trend. Food inflation affects all consumer incomes."

Americans, in particular, cited the following strategies to save money:

• 47 percent say they will shop more for private label brands.
• 48 percent will stock up on regular-use items when they are on sale, especially unbranded cereal/grains, fruits and vegetables.
• 48 percent will exclusively purchase sale price items.
• 44 percent will look for deals online.
• Consumers will cut back on dining out (68 percent), snacking (50 percent) and travel (40 percent).

Global consumers said they are responding to increased food prices by buying more loose, unpackaged, unbranded cereal (14 percent), fresh or frozen fruits and vegetables (11 percent), and canned fruits and vegetables (8 percent). Consumers also reported plans to spend less on products such as candies, cookies and other sweets (59 percent), chips and other snack foods (58 percent), carbonated beverages (53 percent), alcoholic beverages (49 percent), prepared meals (48 percent) and convenience foods (45 percent).

More than half of respondents did not report plans to change their spending on staple categories such as dairy products (68 percent), meat and poultry (62 percent), bread and bakery goods (60 percent), packaged foods (55 percent), and fish and seafood (52 percent).

"Traditional trade is still dominant in many countries, and in these markets, commodity purchases are part of consumers' daily lives," Russo said. "The challenge for marketers will be introducing new brands and products when food inflation is suppressing the ability for these consumers to grow their shopping baskets."

When it comes to location, 33 percent of global respondents said they will shop more frequently at discount/dollar stores, 28 percent said they will shop more at de-stocking/clearance stores and 23 percent will shop more at hypermarkets/mass merchandisers. One-fifth of global respondents said they will shop more at warehouse club stores (21 percent), supermarkets (20 percent), fresh food farmers markets (20 percent) and outlet stores (20 percent) as food prices increase.

In North America, 46 percent of respondents stated they will shop more for private label brands when food prices rise, compared to 7 percent that will increase shopping frequency for national brands.

"Private label brands have a potential advantage during inflationary times," Russo noted. "However, the price must be right and marketing must be effective for private label brands to succeed. Packaging impacts trust and quality perceptions, especially when private labels extend beyond commodity or low-risk product categories.

The full report is available for download here on Nielsen's website.