Report: Inflation Adjusted Grocery Sales
2 November '22A deeper dive into consumer behavior data and what the numbers mean for grocers
While grocery sales will likely be up 6-8% YoY, inflation-adjusted sales will actually be in negative territory. At the same time, disposable income – a significant component to stimulus-related spending – is softening. This contraction in inflation-adjusted sales is likely mostly due to shoppers shifting behaviors to lower priced products, lower priced channels, and fewer non essentials, as inflation for food-at-home prices continue to climb and will likely persist at these historic levels into 2023. In this report, we do a deeper dive into consumer behavior data and share what the numbers mean for grocers:
- Grocery sales in 2022 will likely be up 6%-8% YOY with food inflation expected to come in around 10%-11%. This means that all positive growth is due to inflation. Inflation-adjusted sales for grocery in 2022 will actually be in negative territory
- This contraction in inflation-adjusted sales is due to shoppers shifting behaviors to lower priced products, and lower priced channels, and the purchase of fewer non essential items. We’re seeing higher cross shop, higher inflation, and lower disposable income, resulting in a shift in foot traffic to mass and discounters, while premium retailers are losing ground
- Disposable income has helped to explain the stimulus-related jump in grocery spend in 2020 and 2021, but is softening in 2022 and will impact price sensitivity and grocery spend into 2023
- Cross shop softened in 2019 and 2020 but we expect competitive intensity and cross shop to increase in 2022 as COVID wanes, food prices remain elevated, and disposable income falls
- Both Kroger and Albertsons noted in their most recent 10Q calls that they expect inflation to moderate in the back half of 2022, which is supported by lower gasoline prices and a flat food & feed PPI for almost a year. But recent numbers are showing core and food inflation is more sticky than many expected. This has spooked the stock markets and is causing many to reassess how long it may take to wring out the inflation momentum
The Report: Inflation Adjusted Grocery Sales is included as part of The dunnhumby Quarterly: Inflation Edition, a new strategic analysis of the key grocery themes in times of economic uncertainty. This edition unites inflation-related insights from economic trends, Customer needs, competitive positioning of the 70 largest retailers in the U.S. grocery market, and the perspectives of our battle tested grocery industry consultants.
