CHICAGO — Last year, food inflation in retail and foodservice exceeded levels reached during the Great Recession, according to a new analysis from Circana.
Even with inflation currently moderating, higher food prices will continue influencing consumers' spending and eating behaviors this year, according to the research firm. As food is prioritized by consumers in both tough and good economic times, consumers will use multiple tactics to reduce or reallocate food spending when prices rise, such as trading down to private label, buying in bulk or choosing a quick-service restaurant over a full-service restaurant. Recent examples can be seen in the rising market share of dollar stores in the fresh food vertical more typically the purview of grocery retailers.
Of the $2.9 trillion in consumer retail spending Circana tracks, food and foodservice spending represents the largest share at nearly $1.5 trillion. Food inflation for the 12 months ending February 2023 was 10.2 percent at home and 8.4 percent away from home. Higher food costs also had an impact on discretionary spending, David Portalatin, Circana food and foodservice industry advisor, told attendees at Circan’s Growth Summit this month, and that some of the declines in discretionary retail spending last year were due to food inflation.
At- and away-from-home food and beverage sales grew 8 percent in 2022, exceeding historical norms. At-home food spending remained a larger portion of the food and beverage sales, said Cara Loeys, principal of consumer packaged goods client engagement at Circana, presenting with Portalatin on the "Complete Food & Beverage Consumer" at the summit. Retail food and beverage sales were up 9 percent and reached $931 billion in the 52 weeks ending December, while direct consumer foodservice spending was up 6 percent. With higher food costs and a return to many pre-pandemic routines, consumers shifted their eating and spending behaviors.