From Budget Stores to Backyards
Americans Are Pinching Their Pennies to Put Food on the Table
Inflation is up, and Americans are down. They’re anxious and angry despite positive economic data and (cautiously) optimistic messages from government officials. The realities of Wall Street and Main Street don’t align—it’s been this way for some time—and the long-term effects of this disconnect are reshaping consumer behavior.
According to McDonald’s CFO, Ian Borden, in an earnings call last week, "The consumer is price weary." And it’s no surprise why. A FinanceBuzz analysis found that McDonald’s prices have more than doubled in the past decade, significantly outpacing inflation.
Supermarkets have seen a surge in prices, too. They’re 25% higher than in January 2020, while inflation increased 19% over that same time. That means even though grocery costs are increasing slower than during the pandemic's inflationary spike, the same goods cost more than in recent months or the past year.
According to the U.S. Department of Labor, food cost is the highest in 30 years compared to income. This reality is contributing to the malaise of the state of the economy, as evidenced by recent polls. One in March from The New York Times found that 51 percent of Americans believe the country's economic conditions are poor.
Two-thirds of voters polled by Yahoo Finance/Ipsos in late 2023 said food prices are where they're most impacted by inflation, far outpacing the 1 in 10 who said they feel the impact through gas prices or higher rents.
Shopping for a Deal
Americans are in bargain-hunting mode.
According to data from Numerator reported by the Wall Street Journal, consumers are shifting their buying habits. Between March 2023 and February 2024, they bought groceries from an average of 20.7 different retailers, up 23% from the same months between 2019 and 2020.
Today, the average American shops at two grocery stores for their weekly grocery needs, according to DriveResearch. Price (72%) and location (59%) are the most influential factors for choosing a grocery store
There’s also been a significant trend in the growth of low-cost grocery stores like Dollar General, Dollar Tree, Aldi, and Lidl. According to analytics company GlobalData, these stores expanded their collective footprint in the U.S. by almost 17% from 2019 through the end of 2023.
According to February 2024 data from JLL and RetailStat, Aldi opened more stores in 2022 and 2023 than any other grocery chain, more than double the openings of second-place grocery store Publix. Dollar General has more than doubled its footprint over the past 15 years following the Great Recession. Its stores are now within five miles of 75% of the U.S. population.
“As inflation became front-and-center when people were shopping, consumers have become very deal-focused,” said R.J. Hottovy, head of analytical research at Placer.ai, in a recent interview with the Washington Post. “These value-focused concepts are the ones that people have flocked to, and now they’re starting to come back more often.”
Backyard Bounty
As food costs continue to rise, even in low-cost restaurants and grocery stores, and more pennies are squeezed from Americans’ pockets due to inflation, a growing number are turning to their own backyards to offset costs—they’re digging in.
Today, according to a survey from the National Gardening Association, over 43% of Americans grow some kind of food to eat at home, a percentage that grew during the pandemic and continued afterward. Of those surveyed for its 2023 report, two-thirds (66%) said that inflation was important in planning gardening activities.
This trend harkens back to the days of World War II when families were encouraged to grow their own food to build national resilience. According to the Farmers Almanac, historically, during hard times, home gardens or so-called “victory gardens” significantly contributed to the food supply, accounting for nearly 40% of all fruits and vegetables grown in the country at that time.
While the total percentage of food grown in home gardens today is difficult to pinpoint, the cost savings are not. Washington State University says, “The average household with a food garden will spend $70 a year for seeds and garden supplies; but will reap $600 worth of food.” That's a $530 return on investment.
To put this in perspective, a pound of organic heirloom tomatoes at my local Whole Foods in Washington, D.C., costs $5.49. Yet, on Amazon, Whole Foods’ parent company, a package of 30 heirloom seeds costs $5.89. Each seed can produce a plant that produces 10-30 pounds of tomatoes. So, each plant could save around $50 on the low end, excluding costs for gardening supplies, like soil, pots, and fertilizer.
Here to Stay?
So, will this all translate to long-term behavioral change where financially strapped consumers permanently shift to low-cost groceries and produce their own food? In short, it depends.
Manhattan Associates notes, “On average, it takes around two months before a new behavior becomes automatic, while the time it takes to form an entirely new habit can vary widely depending on the type of behavior, the person, and the circumstances.”
Historical data, such as consumer behavior during the Great Depression, created long-term shifts towards increased saving and frugality. Similarly, the economic impact of the 2008 financial crisis led to a more cautious approach to credit and expenditures that persisted for several years.
“People evaluate uncertainty based not on facts but feelings, " says Ravi Dhar at Yale School of Management. “Similarly, if people I know are struggling with the cost of living, if my social media feed is all about price increases, that’ll have a negative impact on me.”
Have you or someone you know changed their consumption behaviors in recent months or years in response to inflation? If so, I’d love to hear how. Reach out to me today by clicking the message button below.