Kroger is finding that grocery shoppers are trading down and shifting to store brands as U.S. inflation hits a four-decade high, and seeing a particular shift from lower-income households.
“Rising inflation has consumers rethinking their shopping and eating habits,” said Rodney McMullen, chairman and CEO, last Thursday on Kroger’s first quarter conference call.
He added, “While customers continue to cook more, we are seeing different shopping behaviors based on how individual customers are experiencing the current inflationary environment. Many customers continue to shop premium products throughout the store, including Private Selection, Murray’s cheese and Deluxe Meal Solutions. For other customers, whose budgets are more directly impacted by food and fuel inflation, they are actively looking for ways to save. We’re doing everything we can to help this customer stretch their budgets.”
For instance, customers “aggressively moved” to pork amid rising beef prices during the quarter and more cautious spending drove smaller basket sizes.
“What we’re finding is customers were coming in more frequently before, but they’re not buying as many items on each shop and that’s what we’re seeing,” said Mr. McMullen. “We’re also seeing customers, especially customers that aren’t as sensitive to their budget, upscaling with, or buying bigger packs, especially earlier in the month depending on when people are getting money.”
Kroger is further reporting that its owned brands are outpacing national brands as consumers seek value. Said Mr. McMullen, “When the economy is tight, our brands always gain share.”
The Bureau of Labor Statistics reported that food-at-home prices in May rose 11.9 percent over the last 12 months, the largest increase since April 1979. Among the categories seeing the biggest spikes were eggs, up 32.2 percent; chicken, up 17.4 percent; milk, up 15.9 percent; coffee, up 15.3 percent; and ground beef, up 13.6 percent.
CNBC noted that while consumers may be trading down for food, demand for concerts, movies and travel remains healthy due to pent-up demand as pandemic restrictions ease. Luxury spending is also holding up well.
Marshal Cohen, NPD’s chief retail industry advisor, told CNBC, “There is a tug-of-war between the consumer’s desire to buy what they want and the need to make concessions based on the higher prices hitting their wallets.”
- Kroger Reports First Quarter 2022 Results and Raises Full-Year Guidance – Kroger
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- Inflation and recession fears are squeezing some industries more than others – CNBC
- Inflation-Weary Consumers Shift Shopping Habits, Kroger Says – CNN
- Inflation is changing the grocery shopping habits of 95% of Americans as they turn toward discount stores, cheaper private labels, and frozen foods – Business Insider
- Food prices are going up, up, up. Inflation is tough, tough, tough. – RetailWire