Grocery Shoppers Not Only Trade Down but Now Cut Back

As consumers’ economic challenges persist even with grocery inflation declining, brands and merchants alike are seeing consumers pull back on food and beverage purchasing.

Food giant Nestlé observed in a presentation Thursday (Sept. 28) for Bernstein’s Pan European Strategic Decisions Conference that consumers have been purchasing food and beverages less in the recent past, as reported by Bloomberg.

“People are consuming less. Are they eating less? Are they wasting less? Are they eating more out of home? Difficult to know,” Nestlé EVP, Chief Financial Officer François-Xavier Roger said in the fireside chat. “I don’t think that it will last but let’s not forget that we do operate in slightly declining markets by volume, which did not happen that much in the past.”

Roger said this downward trend has been continuing since the start of the year.

Grocers, too, are seeing consumers pull back in response to economic challenges. Grocery giant Kroger, for example, has seen budget-strapped consumers purchasing less and seeking more affordable products.

“The effects of sustained inflation, reduced government benefits including SNAP [Supplemental Nutrition Assistance Program] and higher interest rates have pressured customer spending, especially for those on a tight budget,” Kroger CEO Rodney McMullen told analysts on an earnings call earlier this month. “These customers are buying in smaller pack sizes, [at] times prioritizing the lowest shelf price, … building smaller baskets and switching to lower-priced items to stretch their budgets.”

Similarly, Walmart, the world’s largest grocer, is noting consumers’ demand for low-cost options for food and beverages.

“Getting prices back down in dry grocery is important for the consumer,” Walmart U.S. president and CEO John Furner said on a call with investors last month. He said the company’s price positioning in grocery is helping it gain share in the category.

Indeed, PYMNTS Intelligence reveals that, when consumers’ budgets are pressured, many pull back their spending even on basic day-to-day needs such as food and beverages. The latest installment of “New Reality Check: The Paycheck-to-Paycheck Report,” a PYMNTS and LendingClub collaboration, “The Seasonal Financial Distress Deep Dive Edition,” which draws from a survey of more than 4,200 U.S. consumers, reveals that 40% of shoppers say they spend less on their basic needs to cope with seasonal financial distress.

Consumers are willing to make cutbacks in their grocery purchases where necessary. PYMNTS Intelligence from the study “Consumer Inflation Sentiment Report: Consumers Cut Back by Trading Down,” which is based on a survey of more than 2,000 U.S. consumers, found that 57% of shoppers reported cutting down on nonessential grocery spending. Plus, the results revealed, one-third of grocery shoppers have downgraded from their favorite brands to save money.

Moreover, their financial challenges persist even as grocery inflation normalizes. Findings from the PYMNTS Intelligence “Consumer Inflation Sentiment Report: 45% of Millennials Say Wages Don’t Meet Inflation” reveal that 72% of employed consumers said their income has not kept up with inflation or has barely kept up with it. Plus, 4 in 10 employed consumers say their current salary does not meet their expectations.