Economy
10 August 2022
5 ways inflation is changing food shopping habits
IRI details how people are seeking deals, switching brands and trading down to trade up.

(Illustration by The Current)
IRI details how people are seeking deals, switching brands and trading down to trade up.
When it comes to inflation, food is in focus.
While gas prices are falling from their highs and overall price gains are starting to ease, food prices continue to rise.
The rising food prices are a big reason that the inflation rate remained elevated at 8.5% in July, according to the latest reading of the Consumer Price Index from the US Bureau of Labor Statistics. Overall, food prices rose at the sharpest rate since 1979. In ecommerce, food prices also rose as other categories were falling, according to the Digital Price Index from Adobe Analytics.
The latest data continues months of rising price pressures, as food has been right beside fuel as a key driver of 40-year-high inflation. As customers make repeat visits to stores and see prices are still up, it is leading them to adjust spending behaviors. To provide insight into the consumer’s mindset Information Resources, Inc. (IRI) released insights that show the decisions being made in considering a purchase.
“Consumers are responding to rising prices by shopping promotions, prioritizing value options, and trading down to avoid going without,” said Krishnakumar (KK) Davey, IRI president of Thought Leadership for CPG and Retail. “We are advising our manufacturer clients to deploy all levers of strategic revenue management, prioritize strong in-market execution, and invest in retailer partnerships to ensure that the right products are available in the right places at the right times. Additionally, retailers must have the tools to quickly adjust to changes in consumer preferences to ensure they are offering the right assortment at price points that appeal to price-sensitive shoppers as well as their most valuable customers.”
Here’s a look at several of the key changes IRI found taking place:
Weekly sales and coupon activity is mirroring pre-pandemic levels. In this case, the deals are motivated by the combination of easing supply chain pressures and deal-seeking behavior by shoppers. In a close correlation, IRI said data shows that the categories that had the highest increases in the four-week period ending July 10 were mirroring the same four weeks of 2019. These categories were:
When promotions are activated, shoppers are responding. In the most-discounted categories, “percent of dollar sales and percent of sales volume lift have increased significantly,” IRI reports.
The service shared that 55% of ice cream and sherbet was purchased at promotional pricing in the four-week period tracked, which was 9 percentage points above the level it was four months ago. The promotions generated 93% additional category sales, which is 13 percentage points more than the level of two months ago.
Shoppers still want to purchase the same amount of food, despite prices ticking higher. This is demonstrated by data that shows overall volume and units sold have remained “resilient,” IRI said. Given this, consumers are choosing specific categories that can provide value in the face of rising prices.
Categories seeing increased purchases include pasta (+6 percentage points), rice (+5 percentage points), frozen potatoes (+6 percentage points), and canned soup (+3 percentage points).
Meanwhile, there is less spend in sports drinks (-9 percentage points), ready-to-drink coffee/tea (-3 percentage points), frozen novelties (-6 percentage points), refrigerated entrées (-8 percentage points), and frozen dinners/entrées (-5 percentage points).
When they opt to buy in a given category, consumers are choosing which brand to buy based on price. In some cases, they are trading down for a more affordable brand. Value brands in the spirits category increased their share 4.1 percentage points to 73.6% in the 13-week period ending July 31, 2022, when compared to the prior 13 weeks. In doing so, they took share from premium brands.
Meanwhile, store brands are getting a better look over national brands, particularly in categories where the private label is well known or in a commodity. Here’s where store brand share grew the most in the four-week period ending July 24, 2022:
Shoppers still want the “small luxuries,” IRI said, so they are trading down to save money in some categories but opting for premium brands in others that they particularly want. This is similar to behavior from the Great Recession of 2008-09. Premium and super premium beer saw a share increase of 2.6 percentage points to 51.2%, while frozen dinners/entrées and refrigerated juices and drinks both gained about 1% in share.
On average, customers spend $59 more than the value of their gift card, Fiserv found.
In retail, sales are often measured in goods, whether they are purchased for ourselves or someone else. There are plenty of strategies that brands and retailers use to increase those sales, whether it is marketing, loyalty programs or how that item is presented.
In most cases, these are two different parts of the equation for retailers: The product that is bought and the strategies that lead to the purchase.
That’s what makes the gift card unique.
It is an item you can buy, with a section in the store all its own. Eventually, it leads to the purchase of other goods, so the gift card is leads to a direct sale. Yet it’s also a means to build a retail brand and create incentives that both introduce customers to a store and keep them coming back.
That’s a key takeaway from the 20th Annual U.S. Prepaid Consumer Insights Study from fintech and payments company Fiserv.
At this point, the gift card feels like a staple of the shopping experience. But it is only about 30 years old. In 1994, Blockbuster Video pioneered the sale of cards for gifted purchases directly as a means to combat fraud in paper gift certificates. Since then, they’ve proven to have a multitude of uses that stretch beyond the holidays.
Starbucks and Amazon gift cards are commonly distributed as prizes at team-building events and as pick-me-ups by friends showing they care. In 2022, 60% of consumers said they received a gift card from an employer, according to the Fiserv report. That was a big increase from 32% in 2019. People appreciate the gesture. The survey found that 85% of employees think that gift cards from an employer make for appropriate incentives.
For people looking to show generosity, gift cards can also be a means to stretch dollars. At a time of high inflation, people are looking for deals with their discretionary purchases. Gift card promotions that offer discounts and bonuses are proving particularly popular, the study found. Two-thirds of consumers said promotions can influence them to purchase more, while more than half of consumers took advantage of such an offer in 2022.
Yet the more difficult consumer environment is also having an impact on overall gift card sales. In 2022, the growth of gift card purchases slowed.
“Overall, 56% of U.S. consumers purchased more gift cards in 2022 compared to 2021,” said Tom Niedbalski, VP of gift solutions at Fiserv. “This was a decline from the 73% of consumers who said they bought more gift cards in 2021 than they did in 2020.”
Inflation and less discretionary income were the driving factors for consumers who said they bought fewer gift cards during 2022, as 35% of consumers said inflation was the reason they were purchasing fewer cards.
It's important for brands and retailers to understand why consumers buy gift cards. But it's just as crucial to understand where they can fit in retail strategy. Beyond sales, gift cards can help drive repeat customers, and extend a brand. These tools are particularly valuable at a time when retailers are focused on profitability in a tougher consumer environment.
Fiserv explained four areas in which gift cards are of particular value for brands.The following is directly quoted from Niedbalski:
Improving cash flow and revenue. Gift cards not only drive in-store and online traffic, there is an associated “lift,” or overspend, when a gift card is converted into a sale. On average, customers spend $59 more than the value of their gift card.
Repeat customers. Retailers use gift cards to foster loyalty and customer engagement, ultimately leading to repeat customers. One way we see this play out is through promotions associated with gift card sales. For example: a consumer who buys a $100 gift card for the holidays will receive a $20 bonus card that can be used after January 1 – creating a pre-holiday sale and post-holiday transaction in the New Year.
Branded currency. A gift card places a merchant’s brand directly into the consumer’s wallet, increasing brand awareness and ensuring the merchant’s brand is with the consumer when they are looking to buy.
Year-round marketing. The gift card has grown beyond the traditional holiday season. From birthdays and graduations to anniversaries and babies, gift cards are becoming the most popular way to recognize milestones – giving retailers opportunities to run additional promotions throughout the year.