Price-Sensitive Shoppers Are Buying Less Meat, Poultry and Dairy

Shoppers are paying significantly more for many of their grocery staples than they were a year ago—that much we know, clearly, from federal government data as well as independent market analyses. (Most are at least somewhat concerned about rising grocery prices, too.) 

But new data from Symphony RetailAI, a provider of AI-centric software for retailers and CPG manufacturers, finds that in the fresh category, higher shopper spend is more likely to be driven by inflation alone rather than by a consumer's decision to opt for a more-premium product, or by a change in the retailer's product mix that prompts the purchase of a pricier item. 

"At the store level, only 26% of the additional consumer spend [overall] is being driven by increases in the base price," Symphony RetailAI reported in a newly released analysis of shopper data. "However, when analyzing fresh separately, Symphony RetailAI found that close to half of the average increase in price (45%) is driven by inflation"—higher than that seen in frozen and shelf-stable product categories (both 18%) and in beverages (24%). 

And while consumers still have a strong appetite for shopping the fresh perimeter, with fresh items accounting for 43% of items in their basket on average, according to Symphony RetailAI, what they're putting into their basket from fresh departments is changing. Price-sensitive customers, in particular, are prioritizing fresh produce over fresh proteins. 

"Meat, poultry and dairy specifically are underperforming with price-sensitive shoppers," Symphony RetailAI reported. "This means that traditional grocers have to be strategic with price and promotional strategies given the declining customer base for these categories."

In a survey late last year by FMI–The Food Industry Association and Deloitte, food industry executives identified the fresh department as the No. 1 strategic component of their companies' revenue growth plans in the next few years. More than 80% said they're adding more fresh floor space, expanding product assortment in fresh and/or adding staff within the department, all with an eye toward creating a differentiated, appealing and easy-to-shop experience for increasingly omnichannel customers. 

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Symphony RetailAI's data bears out fruits, so to speak, of a heightened focus on fresh: Fresh categories saw higher growth in shopper households (8%) over the past year than the shelf-stable (7%), beverage (6%) and frozen (5%) categories saw. 

But to keep price-sensitive households, retailers need to take a balanced approach on fresh pricing, Symphony RetailAI SVP Charisse Jacques said. That includes being mindful of items most important to a given retailer's price-sensitive shoppers—whole or reduced-fat milk for kids, for example, or go-to meats ahead of seasonal holidays—and factoring those insights into pricing and promotional strategies.

"If an item is extremely important to price-sensitive customers, the retailer can ensure the item is priced well to reverse any lost perception of value," Jacques stated.