The Rise of Budget Grocery Stores

  • Jul 25, 2023

Global pandemic-related supply chain issues and increased raw material and fuel costs resulted in rising food prices. Even post the crisis, labor costs remain high, wildfires and droughts have led to below-average crop yields, with the continuing war in Ukraine preventing essential grain exports.
 
As a result, the US Bureau of Labor Statistics predicted a 4.1% food production cost increase in 20231. According to a Labor Department report, food costs jumped by 0.2% in May2, with overall prices rising by 4% through May3 – slowing but still higher than pre-pandemic rates.
 
Hence, the cost of living crisis is deepening, leaving many shoppers turning to discount retailers to help make ends meet. At the same time, as overall food price inflation continues to increase, the cost of budget supermarket own-label brands outstrip increases in luxury brands. Impacted products include staples such as milk and butter. In response, many households are skipping meals, unable to afford their full basket.
 
Does This Mean That Retailers Are Putting Profits Above Customer Well-being?
Retailers’ tight profit margins have left them little choice and warranting price increases even as inflation eases. However, neighborhood grocery stores have noted the strain on their customers’ budgets, adjusting to accommodate a switch to more affordable products and brands. These changes include offering a simplified range, smaller pack sizes, and providing discounted promotions and offers. At the same time, consumers are changing their purchasing strategy.
 
How Are Consumer Responding to Continued Food Inflation?
Nielsen IQ (NIQ) reports that consumers are rethinking grocery shopping. Around a third of survey respondents now buy in bulk, focus on essentials only, or on store brands or cheaper items, to help stretch their funds4. This strategy goes hand in hand with, and boosts reported growth in discount grocery stores.
 
The Contribution of Budget Grocery Stores
Walmart reported increased sales in the first quarter of 20235, crediting the growth to the addition of new customers. The budget chain Grocery Outlet noted a similar trend. According to research, grocery stores represent $6.3 trillion in sales – triple the value recorded in 1992 and are expected to grow by $275 billion in 20266.
 
According to Dunnhumby’s 2023 Sixth Annual Retailer Preference Index for US Grocery, among the 63 328 US grocery store and supermarket chains and businesses, the ten most affordable are:

  1. Aldi
  2. WinCo Foods
  3. Grocery Outlet
  4. Market Basket
  5. Food-4-Less
  6. Lidl
  7. Save-A-Lot
  8. Price Rite Marketplace
  9. Walmart
  10. Marc’s7

 
What About Online Versus Digital Shopping?
While online shopping increased during the pandemic, a hybrid approach is more likely, with in-store purchases rising from $58 billion in 2022 to $62 billion in 20238. At the same time, total digital sales remained flat. This return to physical outlets means in-store brand presence, communication, and activations, remain essential, even in budget chains and local grocers.
 
Value is Still King for Many, With Ingredients on the Radar
Consumers are also more likely to shop around for better value, always keeping an eye on health concerns and cleaner labels. So, sourcing pure, natural, affordable flavor and aroma ingredients to enhance flavor profiles is vital for food and beverage manufacturers. Advanced Biotech produces an extensive collection of EU-certified molecules which are superior, sustainable, and competitively priced.
 
Advanced Biotech: Helping Brands Meet Consumer Quality, Purity, and Budget Demands
Explore our range of pyrazines, thiazoles, distillates, absolutes, and more. Our responsibly sourced and efficiently produced flavor and odor molecules accentuate taste profiles without compromising quality, ethics, or overburdening your budget. Please contact us for more information.

1 https://www.buysalvagefood.com/save-money/cheapest-places-to-buy-groceries.html
2 https://www.buysalvagefood.com/save-money/cheapest-places-to-buy-groceries.html
3 https://www.nytimes.com/live/2023/06/13/business/cpi-inflation-fed?smid=url-share#inflation-is-easing-but-is-it-enough-for-the-fed
4,5 https://www.latimes.com/business/story/2023-06-05/grocery-shopping-habits-are-shifting-amid-persistent-inflation
6,8 https://www.driveresearch.com/market-research-company-blog/grocery-store-statistics-where-when-how-much-people-grocery-shop/
7 https://www.buysalvagefood.com/save-money/cheapest-places-to-buy-groceries.html