Food-at-home sales hold their own amid easing inflation

Food-at-home sales are holding strong even as inflation begins to moderate and consumers continue to embrace value-focused shopping behaviors, according to CPG market researcher IRI.

Center-store food and beverage dollar sales climbed 9.2% year over year in 2022, including gains of 11.1% in the fourth quarter and 10.5% in the third quarter, IRI said in its “Impact of Inflation on Consumer Behavior” report, released Thursday. In the perimeter of the store, food and beverage dollar sales were up 6.1% last year, including upticks of 6.3% in the final two quarters.

Inflation has driven much of the dollar gains, with at-home food and beverage pricing up 13.2% in Q4 2022 from Q4 2021, IRI reported. The researcher’s point-of-sale data show unit sales down by 1.9% in the center store and by 3.8% on the perimeter for 2022. The size of volume decreases, though, shrank steadily during the year on a quarterly basis, from -2.1% in center store and -5.4% on the perimeter in Q1 to -1.8% in center and -1.7% on the perimeter in Q4.

Notably, inflation in perimeter departments fell to 7.5% in Q4 2022 from 10.1% in Q3, 10.8% in Q2 and 11.4% in Q1, IRI said. Overall perimeter inflation came in at 9.4% for the year, compared with 12.5% in center store, which saw pricing rise from 9.4% in Q1 to 15.3% in Q4.

Source: IRI Impact of Inflation on Consumer Behavior report, February 2023

Fresh meat and seafood showed the lowest price inflation, at 3.4%, according to IRI POS data for the year ended Dec. 25. That was followed by alcohol (5.4%), produce (7.4%), processed meat (10.1%) and deli (11.3%).

Categories above the 13.2% food-and-beverage inflation average for 2022 generally were center-store departments and included dairy (23.2%), bakery (18%), frozen meals and ingredients (17.5%), shelf-stable meals and ingredients (16.6%), baking (16%), ice cream and frozen desserts (14.9%), beverages (14.8%) and snacks (14.7%).

“The CPG space has proven to be less volatile and more resilient during economic downturns than other sectors. However, shoppers are feeling the impact of high prices and are shying away from discretionary purchases,” Alastair Steel, client engagement executive at IRI, said in a statement. “Multiple tactics are being used to reduce spend and manage budgets, with value channels performing well.”

Indeed, the supermarket retail channel has seen less food-and-beverage dollar sales growth over approximately the past year. IRI’s report shows consumables sales up 7% in the grocery retail segment for the 52 weeks ended Jan. 29, ahead of 6% for mass merchants and supercenters, 4% for specialty stores and 2% for drug stores. However, food-and-beverage sales in that time span jumped 16% for online retailers, 14% in the dollar store channel and 12% for warehouse clubs.

Amid still-elevated CPG pricing, shoppers are employing a range of tactics to rein in spending, including seeking more deals, shifting from national brands to private labels, migrating from supermarket to value retail channels, trading down to essential item purchases, moving from premium to more mainstream or value-focused products, and buying bulk packs or lower-ticket items, according to IRI’s research.

Source: IRI Impact of Inflation on Consumer Behavior report, February 2023

The last three quarters of 2022 have particularly shown market share gains by private label. For premium, mainstream and value CPG brands, share was down in Q1, Q2 and Q3 but up around 1% for private label, indicating an increasing trade-down as inflation escalated, IRI reported. Categories where consumers traded down included deli prepared meats, deli spreads, fresh-baked cookies, shelf-stable meat, sugar, shelf-stable coffee creamer, frozen juice, refrigerated whipped toppings, cottage cheese and bottled water.

Fresh food categories garnered more promotional focus in 2022, whereas center-store promotions were roughly flat. Indexed to 2021 (level equals 100), sales on promotion stood at 104 on the perimeter versus 97 for center store, IRI’s report said. Similarly, the promotional volume lift was 117 for the perimeter and 101 for center store. Generally, promotional activity remains well below pre-pandemic levels, though fresh categories in 2022 saw a bigger promo volume lift versus 2019.

IRI’s report said product segments seeing “significantly more” promotional activity in Q4 2022 compared with Q4 2021—all up between 11% and 16%—included fresh shellfish, frozen breakfast food, frozen novelties, bacon, sports drinks, chicken, fresh tropical/specialty fruit, dinner sausage, fresh finfish, frozen dinners/entrees, fresh citrus fruit, fresh cooking vegetables, pork, cookies and shelf-stable rice.

“Inflation is likely to moderate yet will remain relatively high versus historical standards,” IRI said in the report in terms of CPG trends for 2023. “In-home consumption will remain elevated due to lingering COVID-19 behaviors and economic stress. As such, expect value shopping behaviors to continue to define 2023.”

Source: IRI Impact of Inflation on Consumer Behavior report, February 2023

IRI forecasts 5.5% CPG omnichannel dollar sales growth for 2023, compared with 8.7% in 2022 and 3.1% in 2021, citing relaxed inflation, more price stability, increased price elasticity and higher at-home consumption. CPG volume sales are projected to dip 2% this year, the same as in 2022 yet more than the 1.7% dip in 2021. Price per volume/mix for 2023 is estimated at 7.6% growth, compared with 11% in 2022 and 4.8% in 2021.

Those numbers are well above the historical baseline of 2% to 3% for CPG dollar sales and 1.5% to 2.5% for price per volume/mix, though down from the 0.4% to 0.6% unit sales baseline.

Mass, club, limited-assortment grocery and dollar retail channels will continue to see strong food-and-beverage sales performance in 2023, and more non-edible CPG sales—as well as some consumables sales—will migrate to pure-play online retailers, according to IRI.

“Despite overall trading-down tendencies, consumers will look for premium experiences at home [and] innovation that balances premium experiences, with better-for-you, taste and convenience continuing to do well,” IRI observed in the report. “Private-label use will remain elevated in select areas where consumers are familiar with it; it’s unlikely private brands will make further inroads in categories where name-brands are strong. Promotion will likely increase, driven by increasing competition, yet will remain behind pre-COVID-19 levels of intensity in many categories.”