Grocers Fail to See Expected Surge as Shoppers Cut Back

December sales data reveals that grocers did not get the predicted boost this holiday season.

The U.S. Census Bureau’s advanced monthly sales report, released Wednesday (Jan. 18), showed that grocery store sales rose only 0.1% between November and December. This almost negligible increase marks a significant departure from the surge that would be expected based on consumers’ self-reports concerning their holiday season spending.

In fact, given that U.S. Bureau of Labor Statistics (BLS) data reveals that grocery prices increased 0.3% in that time, it seems that, if anything, consumers actually bought fewer groceries than last year.

In November, PYMNTS predicted a strong holiday season for grocers as consumers shifted spending away from discretionary categories toward the necessities. Data from the study “New Reality Check: The Paycheck-to-Paycheck Report: Holiday Shopping Edition,” a PYMNTS and LendingClub collaboration, which drew from a survey of more than 3,460 U.S. consumers, found that few expected to reduce their grocery spending relative to the previous year, and a significantly greater share expected to increase.

Specifically, only 17% of grocery shoppers expected to spend less on grocery purchases than in 2021, while 38% expected to spend more, and 44% expected their spending to remain constant.

Indeed, the Census Bureau data did reveal a more significant year over year increase, but not enough to outpace inflation. Grocery sales rose 7.3% relative to 2021, while BLS figures show that grocery prices were up 11.8% year over year in that time.

It seems that, as prices continue to rise, consumers are drawing the line, no longer willing or able to buy groceries as they otherwise would.

Research from the latest edition of PYMNTS’ Consumer Inflation Sentiment study “Consumer Inflation Sentiment: Perception Is Reality,” for which PYMNTS surveyed more than 2,100 consumers in December, reveals that 69% of consumers have made changes to their grocery shopping lists in the last year in response to rising prices. Fifty-nine percent have reduced the quantities of items they are purchasing, and 35% have reduced the quality.

“Historically, the reasons why someone may continue to be brand loyal just may not hold anymore because people are being forced due to financial constraints to make tradeoffs that they wouldn’t want to make,” Barbara Connors, vice president of commercial insights at 84.51°, the marketing insights subsidiary of grocery giant Kroger, told PYMNTS in a November interview.

Notably, restaurants’ strategy of absorbing much of the food price increases may be working. The Census Bureau report noted that, while restaurant and bar sales were down 0.9% month over month in December, possibly a result of holiday season at-home gatherings, they were up 16.7% year over year, well above the 8.3% year-over-year inflation rate for the category.

This overperformance of restaurants relative to grocers is surprising, considering that consumers and businesses alike note a shift to home dining. Research from PYMNTS’ study “Consumer Inflation Sentiment: Inflation Slowly Ebbs, but Consumer Outlook Remains Gloomy” found that 78% of consumers have been eating at home more often to save money amid inflation. Food brands too have noticed this trend.

Granted, the year-over-year analysis compares this year’s sales to December 2021, when many U.S. consumers were shifting their behavior in response to the omicron spike, such that it remains to be seen how inflation will continue to affect their restaurant spending.