Holiday Dollars

Leading into the end of 2022, inflation rates, while still elevated overall, in total have begun to come down from mid-year highs of 9.1%1. While the downward trend is a bright-spot, financial pressures continue to erode buying power leading into the holiday season. Inflation is noticed by everyone, whether it’s with groceries, gasoline, vehicles, or home utility bills, they feel the pressure. As a result of inflation, consumers begin to prioritize spending when and where they can, but the overall impact of these increases are unavoidable.

Buyer’s Mindset

With that in mind, it makes sense that 84% of holiday shoppers questioned in a recent survey2 said they would try to save money this year, with 40% saying they’d be buying fewer items, 21% saying they’d be purchasing gifts from cheaper brands and 41% saying they’d be seeking out coupons, sales, and other discounts.

While consumers are eager to save where they can and pursue sales, with the inflation-adjusted discounts, it could be an uphill battle. Reuters3 reported black Friday deals, while prevalent in some parts of the store, actual savings compared to the prior year are scarce. Looking across the total store, apparel discounts for 2022 is the only department seeing sale/discount prices better than the previous year. All other departments are seeing underperforming sales discounts compared to 2021. This inevitably will result in tough decisions of shoppers.  

Purchasing Power

The average household plans to spend $1,455 on holiday purchases, which include experiences, gifts, and other retail spending, according to a survey from financial firm Deloitte. The poll found that consumers expect to spend $507 on gifts: only a slight increase from $501 last year. But for about the same amount of money, shoppers say they’ll purchase fewer presents for their families and friends this year — nine on average per household, down from 16.4

Cutting back on the number of gifts is not the only area consumers are pulling back this holiday, as some may be reducing the number of dishes, or baked treats, they’re setting out at family gatherings. While total inflation is hovering just under 8%, food inflation is outpacing, for both in-home and away.

Mitigating Meal Costs

Food at home inflation rests at a staggering 12.4%, while food away from home sits at 8.6%. This not only impacts weekly grocery lists, but also for holiday dish decisions.

The Food Industry Association recently released their ‘Holiday Shopping’ trend report, that surveyed consumer sentiment and behaviors for 2022. Findings indicated that heading into the holiday season, 45% of consumers report being most concerned about rising meal prices as compared to other holiday expenses. Fortunately, most shoppers indicate they are in control of their grocery budgets, with 71% of consumers making some adjustment to their holiday meal shopping to adapt to the changing economic landscape. To mitigate increased costs, 28% of consumers are looking for deals, 21% are choosing store brands over others, 20% said they are enjoying more homecooked meals while 17% said they are making fewer dishes overall.5 

Channel Impact

While the rising costs impact everyone, not all increases are created equal. Some retail channels, departments, categories, etc. have felt the impact to various degrees. At the channel-level, Conventional (MULO) saw total store average retail price (ARP) increases of 14.3% for the most recent 4 weeks. The Natural Channel, on the other hand, saw around a 9.4% increase for the same timeframe. Looking at a cross-channel view of Conventional Multioutlet (MULO), and the Natural Channel, most edible department ARPs are up double-digits versus the same time last year.

Total US, SPINS Natural Enhanced Channel + SPINS Conventional Channel (powered by IRI) | Trended & 4 weeks ending 10.30.2022 | Edible Dept: Grocery, Refrigerated, Frozen | Average Retail Price

Grocery, frozen and refrigerated represent the three largest departments, based on sales volume, and are the driving forces behind total channel ARP increases. As increases become more prevalent across the store, consumers begin to heavily prioritize their spend. Seeking out available promotions, targeting lower priced products, all while trying not to compromise overall quality of the foods.                                                                                                                                                                                                                                                                                                                          

Private Label Engagement

Noted in the above table, ARP price increases have ramped up in more recent time periods, reducing buying power. With these increases, we have seen strong growth across Private Labeled (PVL) items. In fact, as the price increases across the store, the growth of PVL products also increases.

Over the past 52 weeks, PVL sales growth posted 12% versus the previous year. However, in more recent timeframes, growth has increased, reaching highs of 16%. While not all buyers are shifting dollars to PVL items, there seems to be interest among part of the consumer base in pivoting to PVL to stretch money further and mitigate costs where possible.

Total US, SPINS Natural Enhanced Channel + SPINS Conventional Channel (powered by IRI) | Trended aggregate weeks ending 10.30.22 | Private Labeled Items

On a brighter note, the holiday season is not measured by the number of gifts received, or seasonal dishes prepared, but rather the time spent with friends, family and loved ones. Use this time of year to reflect on things you’re thankful for, while finding time to relax and unwind.

Sources: 1 2 3,increase%20from%20%24501%20last%20year. 4 5

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