Information Resources, Inc. (IRI) released its September 2022 Price Check report with insights regarding food inflation and its impact on consumer shopping behavior. The latest data shows that food and beverage prices in September 2022 increased by 1.0% compared to August.
While food and beverage prices remain significantly elevated — about 13.3% higher year-over-year through the five weeks ending Oct. 2, 2022 — overall year-over-year inflation was steady from August to September, showing a moderating trend after months of steady increases. The moderating effect is being driven by year-over-year price deflation in store perimeter categories (such as produce and deli), whereas prices in center-store categories, including snacks and frozen meals, continue to rise.
Meanwhile, the U.S. Bureau of Labor Statistics released the September 2022 consumer price index. The food index rose 0.8% in September, the same increase as in August. The food at home index rose 0.7% in September, as all six major grocery store food group indexes increased.
Krishnakumar (KK) Davey, president of Thought Leadership for CPG and Retail, IRI, and NPD, said that “September data revealed some welcome news for consumers: Price inflation is slowing down for the first time this year in the perimeter categories that account for nearly $200 billion in annual retail sales. However, grocery bills are still significantly higher than last year’s, causing shoppers to shift their purchase habits. IRI is continuing to track food and beverage price inflation carefully to ensure that manufacturers and retailers can respond to shifts in consumer behavior and execute price, promotion, and supply chain strategies that help them drive growth in this dynamic economic environment.”
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The September 2022 Price Check: Tracking Retail Food and Beverage Inflation include the following insights:
- September inflation inched up. At-home food and beverage inflation for September 2022 increased by 1.0% compared to August.
- Overall year-over-year price inflation is plateauing. Overall, food and beverage pricing remained just over 13% higher in September compared to the year-ago period, in line with August and just slightly above July year ago-levels. The flattening of this curve is a welcome change following the consistent, significant, year-over-year price increases the U.S. has experienced every month from January to July 2022.
- Perimeter categories offer some relief. Prices in perimeter categories were 9.6% higher in September compared to the year-ago period; however, year-over-year inflation in these categories has declined every month since February.
- Inflation varies significantly across the store. For the five weeks ending Oct 2, 2022, prices in the alcohol segment were up 4.2% compared to the year-ago period, while dairy (up 19.6%), frozen meals, and other frozen foods (up 18.4%) were up dramatically higher.
Consumers are using various strategies to cope:
- Reduced consumption. Volume data shows many consumers are tightening their belts and forgoing purchases in categories that have seen significant price increases. For example, sales volumes in the deli service lunchmeat, fresh finfish, frozen dinners, and shelf-stable dinners categories each declined over 10% in September.
- More quick trips. Quick trips continue to grow the fastest of all trip types over the last 12 weeks, up 5.7% compared to the year-ago period. Quick-trip behavior signals that consumers are “cherry-picking” purchases of items at different stores to take advantage of the best deals.
- Shift to larger pack sizes. Consumers are buying larger pack sizes to get better value on a per-unit or volume basis.
- Manufacturers are pulling price-pack levers. To help balance affordability for consumers and rising input costs, food manufacturers are leveraging creative price-pack architecture to keep unit costs lower. Brands across the shampoo, ice cream, dog food, and peanut butter categories have been experimenting with “shrinkflation,” developing smaller pack sizes to keep unit costs steadier even as input costs rise.
For its part, Andy Harig, the Food Industry Association-FMI Vice President, Tax, Trade, Sustainability, and Policy Development, stated, “We understand that inflation poses significant economic challenges and is making money tight for many families. Grocery stores – and the entire food industry – are doing all they can to ensure Americans have resources to plan and budget and remain committed to working with their customers to help mitigate the impacts of inflation.”
“Even though food prices are higher today, the food system will continue to become more efficient and productive, thereby keeping food prices in check over the long haul,” Harig concluded.