Center Store: Back to Basics

The soaring cost of commodities is wreaking havoc on consumers' food budgets.

Whereas in the past shoppers could ride out an economic storm by dining in more often on convenient options like ready-made meals, today's situation requires a whole new level of consumer discipline. “It's really quite different this time around,” said McCusker of IRI.

Think starting a meal from scratch rather than popping a frozen dinner in the microwave.

The trend has revealed itself in Center Store, where volume of ingredients and meal components like flour, mayonnaise and stuffing mixes is growing at the expense of refrigerated meals and other prepared foods merchandised around the store's perimeter, said McCusker.

But the center aisles are by no means insulated.

Skyrocketing wheat, soy and corn prices have pushed even the most basic staples beyond some consumers' reach, McCusker said.

“Pasta prices are through the roof compared to last year and the price of bread is also very high,” she noted.

Significant cost increases in the baby formula and shelf-stable juice categories are also forcing shoppers to make tough choices.

The results of a recent IRI consumer poll revealed that nearly half of consumers who earn $55,000 or less each year said they can't afford their groceries.

“That's a big statement since it represents 60% of the population,” noted McCusker.

Just as alarming are the types of products they're having to go without.

“We asked consumers to tell us what tradeoff they're making vs. six months ago, and again almost half of those in the under-$55,000 category told us they're buying fewer healthy products since they're more expensive,” McCusker said. About half of consumers who earn less than $35,000 a year are scaling back on items like fresh produce.

But the picture is not all bleak. Unit sales improvements are evident in categories that have enjoyed price stability. They include ready-to-drink coffee and tea, granola bars, energy drinks and isotonic beverages.

“Many people can't justify shelling out $5 for a half gallon of ice cream, but they can afford to spend 99 cents on a sports drink,” said McCusker.

Package sizes are also figuring into the decision-making process.

“Consumers might not be able to buy that large package size, especially toward the end of the month,” McCusker said. Since they often come at a premium, consumers are also scaling back on portion-control packaging.

Meanwhile, higher gas prices have fueled a shift in where shoppers spend.

Members of the drug channel experienced significant unit sales increases in several Center Store categories where supermarket unit sales fell short. They include ice cream, toilet tissue, cold cereal, salty snacks and frozen dinners.

“Consumers are saying, ‘I'll make the trip to supercenters for my pantry stocking, but I can't afford the gas to go back frequently so I'll make my fill-in trip locally,’” said McCusker. “Drug stores are benefiting from that.”
— JULIE GALLAGHER