The Gas/Food Price Relationship

Are higher gas prices hurting sales of health and wellness items? Let’s face it, higher pump costs are hurting everything. A new survey of some 26,000 consumers by The Nielsen Company in December found that half of them have reduced spending to compensate for the higher price of gasoline.

Measures they’ve taken include more shopping at supercenter formats, using more coupons and buying less expensive grocery brands, as indicated by the chart below.

“Manufacturers and retailers need to be alert to the fact that consumers are looking to save by altering where they shop, how they shop and what products and brands they buy,” said Todd Hale, senior vice president of Consumer Shopping & Insights for Nielsen Consumer Panel Services. “Value, convenience and competitive pricing will be more important than ever in the year ahead.”

The three criteria Hale mentions are not the first that come to mind when thinking about wellness, particularly organics. So, you have to wonder what kind of impact a recession (are we allowed to say that word yet?) is going to have on wellness category growth.

There is one good note sounded in the Nielsen survey. Forty-one percent of the consumers polled also said they planned to eat out less, and 39% said they plan to stay home more often. Supermarkets with flexible whole-health pricing strategies will hopefully be able to do something with those numbers.

Some operators, like Sunflower Farmers Market in Boulder, Colo., already position themselves as the affordable alternative to premium wellness prices. Mike Gilliland, Sunflower’s founder and CEO, noted as much recently, when he announced an infusion of $30 million in equity financing from private investors to expand the 13-store chain.

“There is tremendous demand for an alternative to the high price format that has predominated in natural foods for so many years,” he said.

Sunflower’s motto also fits in with the times: “Serious Food... Silly Prices.”

Higher gas prices likely would have less of an impact if the economy were stronger. Unfortunately, the one-two combination here makes it even less likely consumers are springing for higher-priced organics and wellness products. If anything, the current state of the economy will likely accelerate the growth of retailers like Gilliland, who emphasize the value segment of the natural and organic categories.