Foodmakers Slash Prices After Grocery Bills Climb 26%

America’s packaged food giants are reportedly cutting prices to woo cautious consumers.

General Mills, Kraft Heinz and PepsiCo are among the food companies who have either reduced prices or extended existing cuts amid cooling sales, the Financial Times (FT) reported Saturday (Feb. 21).

The report points to several factors driving down sales, including the rise of private labels, the popularity of anti-obesity medications and Americans falling out of love with processed foods.

In the meantime, U.S. consumers have cut their spending as grocery prices have climbed 26% in the last five years, the report added, citing the Bureau of Labor Statistics.

According to FT, efforts to bring down prices were a popular topic last week at the Consumer Analyst Group of New York conference held in Florida, where analysts questioned industry CEOs. Among the analysts in attendance was Max Gumport, who studies the U.S. packaged food space for BNP Paribas.

“We are seeing many U.S. packaged food companies lean on price cuts more aggressively with the hope of driving volume growth,” Gumport said.

The report added that food companies steadily raised their prices in 2021 and 2022 due to raw material and labor shortages. Some have kept those patterns up to deal with inflation and U.S. tariffs, Gumport added.

Among the exceptions is PepsiCo, which plans to make “surgical” price cuts of up to 15% on certain snack brands after seeing North American sales dip 2% last year.

CEO Ramon Laguarta said that the “consumer clearly is telling us it was the right thing to do,” adding that retailers would be giving the company’s products more space early this year to accommodate an expected uptick in sales.

Laguarta earlier this month said the company is seeing “a middle- and low-income consumer that continues to be stretched and choiceful.”

Mondelez CEO Dirk Van de Put described similar conditions, saying on the company’s earnings call that “the consumer confidence is near historic low. They’re worried about overall affordability. They are fed up with the price increases.”

Consumers are also turning to installment payment options to cover the cost of groceries, with buy now, pay later services increasingly becoming an everyday cash flow management tool, rather than a driver of discretionary spending.

“For many households, installment options help align grocery and household purchases with income timing, offering predictability without relying on overdrafts or late fees,” PYMNTS wrote last month.