Consumers find it difficult to see beyond price with the topic of inflation on their minds. But fresh food retailers and producers might gain from making it easier for consumers to make healthy choices.
Stress at the grocery store is back this time, not by COVID-19, but the increased prices of food items (figure 1.). Inflation impacts everything consumers do, from where they shop to purchasing items. In turn, it affects the revenues and profits of a food industry trying to adjust. There could be an opportunity for the fresh-to-market food industry and retailers looking to compete for more than price: the constant demands for health and wellness.
While the price of food overshadows the other important buying factors, 84% of shoppers still consider health and wellness when buying healthy foods (methodology). 34% of consumers are looking for more customized nutrition, which is up 13 percentage points from year to year. In addition 55% of people believe they will pay more for best foods due to their contribution to their health and wellbeing.
The idea that health and wellness are essential is one aspect. using food in treating and preventing specific health conditions is a different. Access to information, accessibility and the ease of use are the main issues that food companies need to tackle.
Fortunately food retailers and producers have the opportunity to assist consumers in overcoming these obstacles while improving their bottom and top lines. Most consumers are loyal to their local grocers and are willing to give a portion of their medical records and use technology to personalize their nutritional advice.
But, in today’s hyperinflationary situation, health and wellness’s benefits are unlikely to be understood without regard to cost.
Methodology
- We surveyed 2,054 people (aged between 18 and 70) from the United States, who influenced the purchase of fresh food items within their households.
- The surveys were conducted in the month of July 2022.
- The sample was mapped to the US census to accurately represent the typical US consumer.
- The results reflect an +/- 3 percent Margin of Error.
The primary role of price
At the time of the pandemic three Ps – price, preference and perishability – led to a shift towards frozen food items in comparison in freshly prepared. 1 due to rising prices, price is the dominant factor for almost every aspect.
As an example, in July 2022, the dollar sales growth for frozen equivalents was higher than fresh food sales year-over- the previous year. On a unit-sold base, the two categories decreased in the freezer, with frozen equivalents decreasing significantly more so then fresh. 2 What’s the reason? It is likely to be due to price inflation. Although starting at an absolute cost lower frozen equivalents experienced around twice the price increase as fresh alternatives, the consumers who participated in the study appear to be aware of this (figure 2.).
Three P’s, fresh foods and the 3P’s.
Moving past the frozen-to-frozen contrast, “price” is again the most critical factor for those buying fresh food (92 percent). A more significant percentage of consumers say”they “prefer food options that are low on price” (85 percent, which is up five percentage points over 2021). Concerningly, regardless of whether they are justifiable, 7 in 10 consumers feel that price increases are unfair and could rethink their spending plans in the future if trends from the past persist. 3 In addition, the willingness to pay a premium price for fresh food dropped 9 percentage points from year to year to just 61 percentage.
Perishability is still a concern, but is now more than a financial issue. Around eight out of ten (78 percent) consumers are worried about food waste due to a need to cut down on expenditure. People with lower incomes and those who use food assistance programs are concerned more about waste in food as a purchasing factor, which suggests it’s due to the increase in costs.
In many ways, preferences has also been an aspect of price, affecting how consumers perceive other considerations. As with the pandemic, price inflation has been obscuring other factors. As a result, the purchase factors of the sustainability of, locally-grown local-grown organic are all lower than their pre-pandemic levels (down by at minimum 12 percentage points since 2019). Be aware that all three come with cost premiums that consumers are ready to shell out (for more details, refer to Appendix A: Re-examining the fresh food personas of the consumer).
How do consumers handle the rising cost of living?
Nine out of 10 (92 percent) consumers with a sense of inflation are using various strategies to stay on top of it for the changing market, including trading private label, changing the mixture and size of the basket, and cherry-picking sales from several shops.
Refraining from spending
- About half (46 percent) are purchasing fewer costly food items.
- 40% of them focus on reducing food waste and taking steps to eat more of what they buy. The lower the income of a consumer and the lower their income, greater the likelihood that they are to cut down on waste.
The purchase of cheaper
- About a third of customers are trading up. Many are shifting from brands known to consumers to private label (38 percent), especially in rural regions (45 percent).
- Nearly one-in-five are switching from fresh to frozen or other shelf-stable foods to save money (18 18%) particularly in low-income and rural areas (nearly one-in-four).
- 37% say they’re looking for bargains or using coupons.
Playing the game on channel
- One-third of consumers shop at multiple stores to select the most attractive bargains, but they need more time to complete their shopping list. However, this behavior is significantly reduced for those who are not married or earn more than US$200,000 per year.
- One in five shoppers have switched their leading supermarket to one with cheaper costs (but baby boomers tend to be much more loyal).
- 15% say they are cutting back on online shopping to save on costs.
Steps that are more extreme
- Three-in-ten consumers have stopped buying certain foodstuffs altogether, like the high-end steak, seafood, and the small things that are nice to have.
- 15% of people benefited through a food pantry The Supplemental Nutrition Assistance Programme (SNAP) or the SSP (SNAP) for Women, Infants, and Children (WIC) and similar programmes.
A truth of convenience
Over one-tenth of Americans (38.3 million) reside in a food-insecure home. 4 As these consumers fret about quality, prices food, nutrition, and the need to avoid food waste, they want convenience (figure 3,).
Convenience is what some of the most innovative organizations, like those like the West Side Campaign Against Hunger (WSCAH) is an New York anti-hunger organization, are attempting to provide. 5
For more than 40 years WSCAH operated a model food pantry that was located in a single place. It promoted fresh food and selection however, the model demanded those in need to go to them for nutritious fresh, free food. In the past few years WSCAH turned the basic model of the pantry on its head to provide food to the people.
WSCAH began with an approach to distribution that is based on community. It has now brought nutritious food to more than 50 nonprofits throughout the five Boroughs within New York City, with over 75,000 people receiving food. In the last few years it has been experimenting with initiatives to provide healthy food boxes directly to doorsteps of people within its Digital Choice Project. 6
As per Gregory Silverman, WSCAH’s CEO and executive director, “New Yorkers lead hectic lives, often juggling multiple part-time jobs, and traveling long distances via public transportation. Our customers want convenience in food delivery. This gives them time to cook the nutritious and fresh meals that their families crave and require.”
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The place to go to get healthy and well
Amid rising inflation, it isn’t easy to imagine how businesses can compete in other areas than price. According to several consumer product CEOs, a need for more elasticity in the beginning of 2022 broke away from historical model. 7 Consumers have saved through the pandemic, which they can use to purchase necessities such as groceries, even at more expensive prices. But how long does it last? When savings are dwindling and elasticity rises What will motivate consumers to spend?
Food as a medicine
In terms of the health of your body, diet is essential. A diet that is unhealthy is the most significant risk reason for deaths. The role of a poor diet in the development of cardiovascular disease and type 2 diabetes and some types of cancer–is responsible for one out of five deaths worldwide. 8 Additionally, there are additional health problems that can be linked to food, such as intolerance, the presence of nutritional deficiencies, allergies digestion health, and intolerance.
The United States, over 48 million households are home to a person suffering from a disease that has to be managed with diet. They comprise 60 percent of Americans and more than US$270 billion in grocery sales according to Nielsen data from research conducted together by Food Industry Association (FMI) as well as the Academy of Nutrition and Dietetics Foundation. 9
Many families are also facing health equity issues, and food insecurity, itself, strongly linked with adverse medical outcomes. 10 17 million Americans reside in food deserts, low-income regions far from supermarkets. 11 They would like healthy food but have difficulty getting it.
The concept of food as medicine is a notion that recognizes the preventative as well as therapeutic benefits that can be gained from personalized healthy, balanced diets that are based on research-based, validated claims. More broad definitions also encompass the benefits to nutritional security as well as food security. In no way is this definition to diminish the importance of prescription drugs given by a doctor.
The Academy of Nutrition and Dietetics Foundation “Definition of terms list,” February 2021.
For a long time, food producers and retailers have made health elements of their strategy and messages, encouraging consumers to use fresh foods as medicines might open new avenues. Many consumers believe the best food choices can enhance overall health and well-being (figure four). A minimum of three out of four consumers believe that fresh foods offer therapeutic or preventative benefits, and sometimes could be the most effective medicine. Two out of two consumers are inclined to spend more money for food items that could serve as a medication.
The percentage of people who believe that there is an association between food consumption and health outcomes is a single aspect to consider. Another concern is what benefits they look for when purchasing food items for their health and wellness benefits (figure five). General wellbeing, like feeling better or having more energy, appeals to many people and is logical. However, if you look further, you will discover a strong desire for a variety of beneficial and therapeutic results that come with the use of food as medicine.
Resolving a connection that is broken
Fresh food is regarded with the highest regard for their health. 80 percent believe that fresh food is healthier than processed or packaged food advertised as healthful. However, fresh food has its disadvantages. Packaged products are more likely to make health claims on their labels and are formulated or supplemented towards the most beneficial health benefits.
On the other hand, fresh food is a source of information 62% of people report conflicting information and confusion regarding the health benefits of certain food items. 4 out of 10 consumers need to be sure of the fresh food items that can behave as a medicines. About half the people who purchase these products say it’s vital to have information about the food’s origins, the safety of food, and nutritional properties to use food items as a medicine.
When a connection is made, good things could occur. The research into current strategies, like Guiding Stars branding and the use of signage (used by companies like Hannaford, Giant, Food Lion and Stop & Shop) and Kroger’s OptUP program (see the sidebar for “Innovative intervention”), show positive outcomes for health. 12 Certain studies have also shown that these programs can boost the sales of food items for grocery stores. 13 Retailers are beginning to see the potential benefits for their bottom line. In the latest FMI survey, seven out of 10 retailers felt that the consumer’s are interested in using food items to prevent or treat health problems, which is tied to the idea that food is medicine could positively impact their businesses. . 14
Innovative intervention
It is believed that the Kroger Co. and Kroger Health which runs the in-store pharmacy and the retail health clinics are innovating to improve the health of their customers patients. They have enlisted Registered Dietitian Nutritionists (RDNs) to assist customers locate healthier food options in grocery aisles. They have also joined with an insurance provider to give patients US$75 per month to help them make healthier food choices and piloted diet prescriptions for people with diabetes. 15
However, through one of its health-related interventions, Kroger is both simplifying and customizing nutrition to its customers. It’s known as OptUP an nutrition scoring system designed to make the choice of healthier foods simpler. OptUP scores are available for specific food items and in aggregate for the consumer, based upon their own data on shopping habits. A team of experts created the scores of RDNs, “leveraging data science, evidence-based nutrition information, and machine learning to rate foods on a simple scale from 1 to 100.” 16 OptUP scores can be available on Kroger’s online shopping website and application, which can be used in stores.
OptUP was a part of the recently completed “SuperWIN” study, conducted in collaboration with University of Cincinnati, UC Health, Cincinnati Children’s, and Kroger. The group of consumers which included OptUP was discovered to have the highest increased adherence to the diet strategies to reduce hypertension known as DASH the diet. 17
Data and technology
Businesses that aid consumers in closing the gap between fresh food and the health effects it can bring are in a position to gain the trust of customers and compete on factors beyond price. For around half of the population, the app offered by grocers could aid their health (figure 6,). Customers are more likely to download apps, share their personal data, and trust their grocers to offer specific, food-based health advice. 4 out of 10 customers indicate they are willing to share their medical records, which could result in possible synergy between in-store pharmacies.
The people most likely to share their health and medical information are younger to middle-aged, typically residing in urban regions. Generation Y and those willing to pay premium prices for food and medicine are twice as likely to share data, whereas older boomers are the least likely. Interestingly, people who sometimes buy plant-based alternatives to animal products like meat are almost twice as likely to fall in the willing-to-share-data group.
New ideas to take actions
The current inflation rate is attracting people’s attention so much that it’s difficult for them to pay attention to anything other than price. As long as this is the case businesses must be aware of the purchasing habits carefully (for more information, refer to Appendix B: Inflation-related actions to the sector of food).
However, during rising inflation, there may be a chance to benefit both business and consumers by promoting health and wellness. Retailers and producers of fresh food who can assist consumers in overcoming the hurdles and use foods as medicines can improve their market share in fresh foods and increase customers’ wallets throughout the market. People who choose to take this route may want to look at the following options:
Prepare the way
- Create a solid base for the credibility. Food claims that claim to be healthy must be supported by scientific evidence and clearly defined. Learn to be proficient in the literature of science. Utilize RDNs and other medical experts to verify and validate claims before connecting benefits dots for consumers.
- Health stock. Just like a retailer would have products in stock with different prices and also with better, more and of the highest quality, ensure that you’re providing choices that meet your the health needs of your customers and preferences, such as for certain categories like those with diabetes, heart problems, or who suffer from food allergies.
- Create essential partnership. Health is an ecosystem, and it’s a bit hazy. Look into partnering with organizations who can to provide context, offer resources, and help fill in the gaps. For example, insurance companies may be able provide financial assistance due to their incentives built into health. Other companies can fill in data gaps. Some organizations, such as Guiding Stars Licensing Company, or Good Measures, have data mapping between food products and nutritional properties, which could accelerate the time to market.
Deliver value
- Begin at the home. Consider building program elements that can help employees as well as those in communities who have food not able to afford fresh food. Apart from the obvious advantages of a healthier lifestyle it can also be a means to begin partnerships and find out which programs work and can lead to better outcomes.
- Utilize the latest technology. There is nothing like an RDN personally leading an individual through the aisles and informing customers about eating healthy and shopping. But enhancing the experience requires technology. The most effective apps can incorporate health profiles using data from multiple sources, and keep the nutrition advice simple. 18
- Develop a more intelligent supply chain. Consumers want item-specific information to make use of food products as medicines, which require the tracking and traceability. Food producers must provide comprehensive data on safety, health in close collaboration with retailers. Offering this information to consumers within a context of medicine-based food could be a way to maximize the value of the investments made to meet proposed future Food and Drug Administration traceability requirements. 19
Explore new frontiers
- Make use of pharmacies in-store. While initial efforts might require customers filling out profiles, creating methods for customers to share their information with pharmacies could result in better profiles for personalized suggestions. Complying with legal ethical, regulatory, or other regulations is vital.
- Think about the bigger idea. The health care industry itself is evolving, with a more comprehensive view of health equity as well as new incentive structures designed to improve people’s health over the procedures. It’s a small leap to imagine fresh food and grocery stores and their reputable roles in their communities working with healthcare providers and payers to meet the needs of people. There are already instances of collaborations that have been implemented. Other companies could enter the fray in the event that the food industry needs to take the lead.
Appendix A: Revisiting fresh food consumer personas
Our study for 2020 revealed two distinct consumer personas, based on the responses related to the frequency of shopping, the amount of food items purchased fresh as well as perceptions of price channels and stress when shopping and experiences of stocks outs. We identified two distinct consumer personas: Traditional and Contemporary, emerging in 2022, just like the prior two years.
Modern consumers comprise 40% of group, which is a five-percentage points decrease from the survey last year. An increase in retail shopping during a post-pandemic situation could cause this drop. The current consumers are generally younger, wealthier and online-based shoppers and urban living. The traditional consumers, on contrary tend to be older, live in poorer households and are mostly rural.
When we look at the health and wellness issue more deeply in this survey edition two essential aspects need to be considered by grocery stores trying to capitalize on this opportunity.
- More contemporary consumers (59 percent) than traditional consumers (40 percent) are prepared to share their personal details about their health with preferred grocery store to get personalized food suggestions.
- Modern consumers (56 percent) are convinced that they can get healthy nutrients from fresh food compared to processed food items and supplements. Only 44 percent of Conventional consumers believe this.
Even the most ardent advocates of fresh food aren’t in the least susceptible to price-based influences on their choices and behavior. Seven out of 10 contemporary buyers are willing to shell out more for fresh food, however the percentage willing to pay more fell 7 percentage points over the last year. When buying fresh food is a good idea, brand names remain important to Contemporary consumers (55 percent) over conventional (35 percent). Brand name’s importance in the eyes of Contemporary consumers decreased from 71 percent in 2021 to 55% by 2022 (figure 7).
Appendix B: Actions to combat inflation in the industry of food
Although the continued interest in health and wellness presents an opportunity for food companies, they and retailers must continue to adapt to changing consumer behavior and tastes triggered by inflation. Some suggestions derived from the report’s results include:
Find consumers in the places they are
- Be a part of helping those in need of assistance. Make it easy and stress-free for customers to access benefits for food assistance at the grocery store, but more specifically on the internet. Over one-in-10 individuals within the United States are using SNAP benefits. Yet, only a tiny percentage of the 250,000 stores that can accept these benefits will accept SNAP Electronic Benefit Transfer payments on the internet. 20 The majority of consumers want the convenience of online shopping and delivery.
- Allow trading downs. It is happening and it’s time to make it more convenient. Strategies include anticipating where customers are moving, having the stock available, using creative ways to place products on shelves, and highlighting your most preferred options on search results. This could include manufacturers launching lower-end brand variations. Reengineering these products to concentrate on the features consumers are most interested in. Removing non-valued features and ingredients can reduce costs while increasing the value in the eyes of consumers.
- Expand private label options. Trading down means that there’s a chance for retailers, as well as the manufacturers that supply them, to create private label. Consumers are indicating that they prefer to switch from a brand name to private label, rather than switching forms of consumption (such as purchasing canned food instead of freshly prepared). If done properly, private-label products can target certain segments or segments of customers who could start to favor those products over mass-produced national brands.
Collaboration is critical to better outcomes.
- Clarify prices. Keep costs down whenever possible, use fair pricing practices, and if prices have to be raised, ensure customers and partners understand the reasoning of the decision. Transparency across the value chain can help people trust the motives of others and can lower the suspicion of price slashing.
- Help consumers to avoid the waste. Consumers do not want to throw away food, particularly in the present. Anything that can help consumers get their food in before it spoils can be beneficial. The assistance could come in many types: the right size of packaging and improving cold chain efficiency to make food items as fresh as possible as well as education on the best-by-dates and storage techniques. In some ways, it involves consumers reducing the risk. Freshness assurances can provide comfort.
- Protect yourself from the abuse. Food manufacturers can collaborate with retailers to restrict abusive shopping behaviors like coupon stacking and other manipulation of promotions. Certain retailers use their customer database platform and coupon system to determine the potential audience for digital coupons to customers who need or respond most effectively, but without causing unprofitable consumer relationships. Retailers can dissuade cherry-picking by not setting all sales items in one location making it easier to grab sales items and transferring to the next store much more straightforward. Think about using loyalty programs to offer rewards based on the overall dimensions of the basket to encourage filling all shopping lists in one location.
Consulting Services for Consumer Products
The industry of consumer goods is facing unimaginable issues and possibilities. The decline in brand loyalty, the increase in mergers and acquisitions, the persistent recessionary attitudes of consumers, and the growing impact of digital technology on purchasing behavior all threaten the traditional business model. Still, they also create innovative and new ones. In the face of evolving consumer preferences and needs, Deloitte’s Consumer Products team is working with clients to improve the effectiveness of their analytics, enhance internal processes and create market-facing new capabilities and channels. With expertise across a broad spectrum of industries, including food and beverages as well as household and personal items such as apparel, agribusiness, footwear, household goods and more, we help our clients lead confidently in the face changes.
