With grocery prices having soared 21% in the past three years, demand has risen for Spam, Manwich sloppy joes, Libby’s Corned Beef and Chef Boyardee Spaghetti & Meatballs.
“Spam is a regular item again,” Miguel Garcia, who owns Keyfood and Met Foodmarket supermarkets in New York, tells the New York Post. “I’m selling them at discount now because I’m buying more.”
Consumers at all income levels are realizing that while grocery price increases have slowed, they are not reversing.
This has been prompting big food manufacturers to dangle discounts, albeit shallow ones, and shoppers to stock up in bulk — but at rock-bottom prices, Garcia says.
“Our average sale was closer to $20 at the end of last year, and now it’s about $15,” Garcia said. “People are putting less expensive items in their carts.”
Even households with six-figure incomes are shopping at such discount stores as Dollar Tree and Costco. Dollar Tree is increasing its price ceiling to $7, as more six-figure shoppers flock to the discount store, CEO Rick Dreiling said on a recent earnings call.
The goal is to offer shoppers a more “relevant assortment,” Dreiling said, noting that most of the chain’s new customers in 2023 came from households making more than $125,000 a year.
Many of the biggest makers of packaged foods and drinks, like Kraft-Heinz and Conagra, are seeing their sales volumes fall, due partly to low-income consumers — typically making roughly less than $35,000 per year — cooking from scratch, using up leftovers or just buying less.
Roughly one-third of Black American households and 21% of white American households fell into this category in 2022, according to the latest available U.S. census data.
"We expect reduced SNAP [food stamp] benefits will be a headwind," Dollar Tree CEO Richard Dreiling said during a March 13 earnings call. Dreiling was referring to the U.S. government's supplemental nutrition assistance program (SNAP), which provides benefits to low-income families to help them afford groceries.
To appeal to Americans who can no longer afford fast food, Conagra in late May will introduce new Banquet chicken patties, priced at $6.99 for six, a company spokesman said. Chicken sandwiches are top picks at fast-food chains.
People struggling to make ends meet are buying “whatever is on the shelf that you can stretch longer and further to feed the many mouths that might be sitting around the table," said Carlos Rodriguez, chief policy and operations officer at City Harvest, which distributes fresh food in New York City.
They are "forgoing items you normally want, which is fresh nutritious food,” Rodriguez said.
Consumer companies' new emphasis on value and discounts is a reversal from their strategy during the pandemic and immediately after, when they focused on premium products, touting new flavors and options in an effort to justify climbing prices.
Now food companies must “make sure they are attracting the value buyer back into the fold,” said Duleep Rodrigo, U.S. consumer and retail sector leader at KPMG. “They can’t get volume without this key segment.”
Nissin Foods, whose products like Cup Noodles sell for under $1, saw unit sales decline last year in its category, Brian Huff, CEO of the U.S. division of the Japanese company, said in a March 18 interview.
The company is investing in buy-one-get-one-free deals at Florida-based Publix, for example, and other promotions to encourage so-called pantry loading, Huff said.
Kraft macaroni and cheese maker Kraft Heinz, cereal company WK Kellogg and Kellanova, which sells Pringles chips, are among the food companies ratcheting up discounts after a years-long hiatus during the pandemic, investment bank Jefferies said in an April 3 research note.
"We have a large canned-meat portfolio," said Bob Nolan, Conagra senior vice president of demand science. "It's on fire." Conagra manufactures Armour Star Vienna sausages, which are sold for $1 for a 4.6 oz tin in Walgreens stores, for example.
Nolan said sales of Conagra's corn-based snack Andy Capp's have "been up 20-30%." And sunflower seed snacks like David Seeds, which "last you a whole baseball game," are "doing spectacular," he said.
J.M. Smucker is continuing to see an uptick in sales of its Jif peanut butter, according to CFO Tucker Marshall, which he said "provides a very cost-effective form of a protein," Marshall said.
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