Americans are spending more on groceries. But they’re buying less
The past few months of robust grocery store sales would suggest that shoppers aren’t stretched for cash. But that’s not the full story.
Food manufacturers like Kellogg, PepsiCo and Nestlé all reported sales growth in the first quarter of the year.
But even though sales are up, people are buying less. Growth has been fueled by higher prices, which offset declining volumes.
"If you look at the top-line dollar sales, it is obviously very positive,” said Alastair Steel, executive, client engagement for market research firm Circana. “But it really is driven by price increases.”
This year through May 21, compared to the same period in 2022, sales of fresh eggs by volume fell 4.7%, milk dropped 3.9%, packaged bread fell 3.8%, and fresh root vegetables slid 3.5%, according to Circana, which tracks US retail sales. In that time, dollar sales of eggs rose by 41.2%, milk rose by 0.9%, bread jumped 8.5% and fresh root vegetables rose 10.7%.
Prices of each of these items rose during that period. Fresh eggs shot up 48.2%, milk rose 5%, bread rose 12.7% and fresh root vegetables went up 14.7%.
Steel noted that early in the pandemic, when people stopped eating at restaurants and stocked up on pantry staples, unit sales soared. Since then, they’ve been coming down. Some of that can be attributed to an “unwinding” of that 2020 boom, he noted. At that time, people could also use Covid stimulus payments to cover costs. Those who were working from home didn’t have to spend money commuting.
By volume, grocery sales are still generally up compared to 2019, he noted. But that increase isn’t so much a sign of extra cash — it’s a sign that people are trading down from restaurants to preparing food at home.
Dining in isn’t the only way that people are saving. Some Americans are trading down by going for cheaper items, or shopping at bargain stores.
In the year through April, food prices went up by 7.7%, with grocery prices rising 7.1% and menu prices increasing 8.6%, according to the latest data from the BLS’ Consumer Price Index. Prices overall rose 4.9% throughout the year.
"I don’t believe that price is going to come down,” said Steel. “The rate of increase is starting to slow down and stop. But it’s not completely gone away. We are still seeing prices, month over month, they’re still going up — although much less than they were.”