Shoppers consistently say price is their most important consideration in grocery shopping. And with the small profit margin for grocers, “we focus so intensely on food prices because our consumers demand that we do,” says Andrew Harig of the Food Marketing Institute, a trade group. “The recession that began in 2008 certainly drove many consumers to focus more on what they were paying for groceries but these impacts persist even in 2016,” Harig said at a House Agriculture subcommittee hearing on food prices. An FMI survey found more than two-thirds of shoppers said spent the same amount, or less, on food in 2015 as they did in 2014. Shoppers are more likely to focus on the total cost of a meal so they are quick to swap one ingredient for a lower-cost item, Harig said.
“The last few years have seen a much broader use of private labels that often are lower prices than national brands,” said Harig. Over 40 percent of consumers taking part in a “Power of Meat Survey” in 2015 “admitted that price increases changed the way they bought meat and poultry.” The most common response was to buy less of the preferred cuts of meat. Other common approaches were to buy meat that was on sale, to shift to lower-priced cuts, and to take advantages of discounts for buying in bulk.
Middle-income Americans spend 13 percent of their disposable income, or $6,000 a year, on food while the lowest-income groups spend 34 percent of their income, or roughly $3,700 annually, on food, said Ephraim Leibtag, assistant administrator of USDA’s Economic Research Service. The U.S. average is around 10 percent.
Food prices are forecast by USDA to rise by 2 percent this year, roughly the same as the 1.9 percent increase of 2015 and below the long-term average of 2.6 percent annually. Meat prices hit record highs in 2014 and are moderating this year.
Separately, an ERS report said more than three-fourths of WIC benefits are redeemed at large stores. “Although WIC may not encourage participants to be price sensitive, the many redemptions at large stores may be due to the 63 percent share of WIC vendors that are large stores and participants’ tendency to shop for WIC foods at the same stores where they shop anyway,” said an ERS summary. WIC provides supplemental food for low-income pregnant women, new mothers and their children. More than 8 million people received WIC benefits at a total cost of $6.2 billion in fiscal 2015.
To read testimony from the subcommittee hearing or to watch a video of it, click here.