Has there ever been a better time to shop the perimeter of the store, as health experts have always urged?
Produce and other fresh departments are getting credit for flattening the curve — the inflation curve, that is.
The prices in grocery retailers’ fresh departments — such as produce — are deflating, which is moderating price increases in food and drink overall, according to the September 2022 Price Check: Tracking Retail Food and Beverage Inflation report.
The report was released by Information Resources Inc., known as IRI, which merged with The NPD Group, to create a technology, analytics and data provider. The insights on food inflation and its impact on consumer shopping behavior come from point-of-sale data for September and includes data across U.S. food channels, including grocery, drug, mass market, military commissaries, select club and dollar stores as well as e-commerce, according to a news release.
The latest data shows that food and beverage prices in September 2022 increased by 1% compared to August.
Related news: Fresh fruit led August inflation jumps in food and beverage, says IRI
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.
“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,” Krishnakumar (KK) Davey said in the release. He’s president of thought leadership for consumer packaged goods and retail at IRI and NPD.
“However, overall grocery bills are still significantly higher than this time last year, causing shoppers to shift their purchase habits,” Davey said.
Four price insights
Key insights from the September 2022 report include:
- 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, according to the release.
- September inflation inched up. At-home food and beverage inflation for September 2022 increased 1% compared to August.
- Overall year-over-year price inflation is plateauing.
- 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.
Shopper behavior
Consumers are using several 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.
Shrinkflation
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 more details, check IRI's September 2022 Price Check: Tracking Retail Food and Beverage Inflation report.