Consumers Feel Impacts of Food Inflation Twice as Much as Actual Price Increases

As food prices skyrocket, the effect on consumers exceeds even that of the already dramatic increases seen in the hard data about these price changes. These impacts are compounded by consumers’ deteriorating financial situations.

A national online study of 3,783 consumers conducted by PYMNTS this month revealed that the majority (53%) of consumers said their financial condition is worse in 2022 than it was in 2021. This downturn is influencing their grocery habits. Additionally, nearly half (45%) of consumers said they will shop at grocery stores other than their usual favorites in an effort to find better prices on the products for which they are looking.

Read more: Why Retailers Should Worry About Inflation but Dread the Wealth Effect

The impacts of food inflation felt by consumers exceed even the already sizable price increases seen in the data. The Consumer Price Index for All Urban Consumers (CPI-U), reported by the U.S. Bureau of Labor Statistics (BLS) earlier this month, revealed that food prices rose 10.4% year over year, food at home (i.e., grocery) prices rose 12.2%, and food away from home (i.e., restaurant) prices rose 7.7%. Meanwhile, PYMNTS’ survey found that consumers report paying 20% to 30% more for retail and grocery purchases and to eat at restaurants.

“For the average consumer, reality is not shaped by how much the government tells them things cost; it’s shaped by their personal reality when they go shopping and pay their bills,” PYMNTS’ Karen Webster noted in her commentary on the survey.

Leading grocers are seeing these cost pressures affect consumers’ spending in myriad ways. Walmart, for one, the world’s largest grocery retailer, has found that, in the United States, the amount that consumers are spending on groceries has them making more conservative choices in other categories.

“The increasing levels of food and fuel inflation are affecting how customers spend, and while we’ve made good progress clearing hardline categories, apparel in Walmart U.S. is requiring more markdown dollars,” Walmart President and CEO Doug McMillon said in a statement accompanying a profit warning issued by the retailer Monday (July 25). “We’re now anticipating more pressure on general merchandise in the back half.”

See more: As Walmart Warns, Consumers See Nearly 2 Years of Inflation Pain Ahead

Pure-play grocer Albertsons Companies, which has more than 2,200 stores across the U.S., is seeing its customers get thoughtful about where they save and where they splurge. On a call with analysts Tuesday (July 26) discussing the company’s first-quarter fiscal year 2022 earnings results, CEO Vivek Sankaran noted that, as some consumers trade down, others’ behaviors are more varied.

Read more: Albertsons Turns up ‘Sticky’ Digital Engagement Efforts as Shoppers Seek Deals on Groceries

“There are consumers who have cash but are very value conscious,” Sankaran said. “They are buying more. They are trading down on deli meats, but they’re also buying a lot of store-made sandwiches and meals. … Instead of buying one avocado, they’re buying bags of avocados. So, we’re seeing this behavior where people are value conscious but are willing to spend on the things that they care about.”