How are US consumers adapting their grocery shopping habits in response to rising food costs and inflation? Diving into proprietary survey data from Coresight Research, this episode of Retaili$tic highlights the shift toward value-focused shopping, the impact of new tariffs on grocery prices, and the strategies that retailers are employing to meet changing consumer demand. The conversation also touches on future trends in the grocery landscape, emphasizing the importance of adaptability for both consumers and retailers.
Takeaways
Chapters
00:00 This Week in Research: New Reports and Data
02:12 Shifts in Grocery Shopping Habits
05:09 Impact of Inflation on Dining Out
06:30 Effects of New Tariffs on Grocery Prices
08:38 Retailer Strategies in Response to Consumer Shifts
10:15 Future Trends in Grocery Retailing
For more on this topic, read the full report from Coresight Research: Tariff Anxiety Hits the Supermarket: US Consumers Turn Cautious When Shopping for Groceries.
Speaker 2 (00:00.398)
Welcome to Retaili$tic, the official podcast of Coresight Research for May 6, 2025.
This week, we're savoring some new findings on the menu of approaches consumers are taking to deal with increasing food costs. Stephan Deemer is back with us this week to pepper us with research from a couple of reports. But before we take our first bite of food research, we get a table visit from the head chef, Georgina Smith, from the London office to preview some new selections available on Coresight.com. Hi, Georgina.
Hi, Philip. In addition to our deep dive on how US consumers are shopping for groceries, which this podcast episode will cover in detail, notable new research this week includes our latest US Consumer Survey Insights Extra report. This series offers a more detailed or specific take on trends and data from our weekly surveys of US consumers.
Given the uncertainty around new tariffs and inflation, our new report focuses on consumer sentiment. We unpack consumers' expectations for their personal finances and the economy over the next 12 months, analyzing shifts since the beginning of the year. We break down data by age, income, region and ethnicity to provide a comprehensive picture of which consumers are most optimistic and which are most concerned for economic and personal prospects. Plus, we assess consumers' sensitivity to recent stock market changes and consider whether age and income impact consumers' likelihood to alter their spending based on these changes.
Through our survey insights extra report and the grocery focus deep dive, we are taking a hard look at the US consumer this week and the implications of behavior and sentiment for retail. Also, our coverage of first quarter 2025 earnings continues. We provide high level data on Coresight 100 retailers recent performance in free infographics each week, alongside detailed management commentary and insights on companies future outlooks for our premium subscribers.
Thanks Georgina. We're delighted to have Stephan Deemer from the editorial team with us today to unpack how Americans are navigating grocery shopping amidst high inflation and the looming impact of new tariffs. Stephan, thanks for being here!
Thanks for having me, Philip. Excited to dig into this very timely topic.
Let's set the stage. Grocery shopping is a universal experience, but it's been anything but routine lately. Stephen, based on Core Sites research, how are consumers approaching grocery shopping today and what's driving their decisions?
Yeah, so it probably doesn't come as a surprise, but consumers are hyper focused on value right now. Our new survey shows that 59% of consumers prefer retailers that are offering personalized deals and around the same percentage are leaning towards stores that locally source their products. know, convenience and price are still king, but there's a clear shift towards strategic shopping. You know, you could think weekly store visits, a laser focus on essentials like dairy, meat, and produce that's leading to shorter dwell times. It's really all about stretching the dollar as far as it can go.
Makes sense, especially with economic pressures mounting. Let's talk about inflation, which has been a major factor. The new report notes grocery shopping costs rose 5.7% from January to February this year. How have consumers adapted their habits to cope with that?
Yeah, and inflation has definitely forced a rethink among consumers. Our data, alongside other recent surveys by companies like LendingTree, they've revealed that 44% of consumers are switching to either generic or store brands in order to save money. And then another 38%, they're sticking very strictly to their shopping list to avoid impulse buys. And around 30% are meticulously comparing prices across different stores.
That's resulting in a pivot to discount retailers. So you could think of, you know, all the grocery outlet places like that, where the prices are just more manageable. And then over half are leaning on coupons and promotions and around the same amount are stocking up on essentials after they've been discounted by the store.
So it's a mix of pragmatism and creativity. Are there specific categories where these changes are most pronounced?
Yeah, absolutely. our research found that dairy, the deli department, the meat department and fish counters, those are areas where consumers have most noticed price hikes in the past few months. Some 80 % of shoppers have seen increases in their dairy costs. 77 have seen increases in their meat costs. So consumers are now responding via a couple of different tactics. Around two thirds are buying meat when it's on sale, as we talked about. Around 43 % are just cooking with less meat. And then about one third are swapping it out for cheaper proteins. You could take beans, even eggs, even though we've, obviously everybody knows how much those have gone up to. It's just, it's a clear shift towards budget conscious choices.
Yep, that's a clear picture of how people are adapting. Let's zoom out for a moment. Inflation isn't just a grocery story, it's impacting dining out too. As the New Food Service report shows, how are these pressures reshaping consumer behavior across both grocery and restaurant sectors?
Yeah, so there's a fascinating interplay between those two sectors. Our recent food service report projects that the U.S. food service sales will hit about $1.1 trillion this year in 2025. But that's despite the fact that restaurant prices, or maybe because the restaurant prices have surged by just over 25 % from 2020 through 2024. And that, as a result, has pushed just over 60 % of consumers who have noticed those price hikes to dine out less and that's per survey that we took right at the end of March 2025.
Meanwhile, as we all know, grocery shopping offers you a bit more control over your food costs. So we're seeing consumers pivot to cooking at home. And that's despite the fact that if you look at the data, the gap between food at home and food away from home inflation is narrowing, but it doesn't change the fact that dining out still feels like a luxury for many consumers.
Yeah, I'll date myself, but I remember the first time I got a $20 ticket at a restaurant.
It's shocking, sure.
That shift to home cooking is telling. Now let's bring in the wild card, new tariffs. Our research suggests these could raise prices for imported groceries like seafood and coffee. What's the potential impact here and how might consumers react?
Yeah, tariffs are a big concern for retailers and consumers alike. You know, they act as a tax on import and retailers often pass those costs off in part or sometimes even in full to consumers. So we've been covering tariffs quite a bit. And our recent 2025 tariffs report shows that many we expect many negative economic impacts. Specifically, we're looking at higher prices for goods that are highly imported. So seafood, coffee, chocolate, olive oil, things like that.
And then on the food service side, the National Restaurant Association recently estimated that the tariffs could cost the food service sector over $12 billion this year. And some of those costs you're going to see in the grocery store as well. As we've talked about, consumers are probably going to do quite a few things. They might switch to domestic alternatives, hunt for cheaper substitutes like store brand, olive oil, or if they can't find those domestic or cheaper alternatives, just cut back on those items. We could also see more shopping like we talked about at discount stores or at, you know, bulk retailers, think Costco, BJ's wholesale, stuff like that.
Wow, that's a lot to absorb. Are there signs consumers are already bracing for this?
Yes, so we conducted a survey on March 3rd, 2025, and it found that 60.7% of consumers are most worried about price increases of all the effects that tariffs could bring. They're already price sensitive from inflation, so we expect this could amplify behaviors like, you know, like we said, seeking private label products or just reducing their overall spending.
Some are going to probably stick to pricier imports if they're seen as essential or high quality. I think a lot of people might not cut down their coffee just yet, but most people are probably going to be prioritizing affordability.
Okay, let's talk strategy. How are retailers responding to these consumer shifts, both from inflation and potential tariff impacts?
Yeah, retailers right now they're doubling down on value. Our research shows that retailers are expanding their private label offerings, which are usually around 20 to 30 % cheaper than name brands. They're also leveraging technology. there, you you think AI driven, you know, personalized promotions or mobile apps that highlight deals specific to where you are in a store.
Chains like Albertson's and Kroger, they're investing in their loyalty programs to keep shoppers engaged, keep them coming back as opposed to diversifying the places that they're shopping. And then for tariffs, some are going to absorb costs to stay competitive. But ultimately, smaller retailers, they may have no choice but to raise prices, which could push consumers to bigger players or online platforms.
That tech angle is intriguing. The Food Service Report also mentions AI in restaurants like quick service restaurants using automation to streamline operations. Is there a parallel in grocery retail?
Yeah, definitely. Grocery retailers are using AI for a lot of things, including inventory management, predicting demand, and tailoring promotions to specific consumers. It's really all about efficiency, but also about meeting consumers' expectations for convenience and meeting them where they are. So, for example, online grocery platforms are refining their algorithms to suggest budget-friendly alternatives, which could be crucial if we see more tariffs or more price hikes.
It's definitely a way to retain consumers who otherwise might switch to a different platform or retailer or just cut back spending overall.
Looking ahead for the remainder of 2025, what trends should retailers and consumers watch for in this grocery landscape?
Yeah, I think throughout the year we can expect value to remain front and center. Retailers are going to lean harder into promotions and their private label offerings, especially if we see additional tariffs or, like I said, know, increased costs on the retailer side. We'll also likely see a growth in people going to discount stores, bulk retailers as consumers continue to seek savings.
And, you know, as we said, technology is going to play a bigger role, think smarter apps specifically, in-store automation, offering incentives that aren't solely based on value to sort of at least retain consumers. And then for consumers, it's going to be about staying informed on deals and being flexible, whether that's switching brands or shopping channels. So really for both retailers and consumers, it's going to be the ones who adapt that are going to be able to navigate this environment best.
Well, those are great insights, Stephen. Before we wrap, any wild card predictions for how this all plays out?
Yeah, I think it's a little unlikely, but if tariffs persist, might see a renaissance of domestic food production. Consumers and retailers could push for more made in the USA products. We've seen something similar with our country that borders us to the north, Canada. We've seen an increase in made in Canada products there. And I think we could see a similar thing here from coffee substitutes or just like Hawaiian made coffee, stuff like that, to seafood. It's definitely a long shot, but...as we've seen throughout history, economic pressures can spark really unexpected innovation.
Just have to get the HOA to approve chickens in the backyard.
Exactly.
Alright, Stephen, thank you for breaking this down for us and joining us this week on Retaili$tic!
Thank you.
In the meantime, can follow Coresight Research on LinkedIn for updates and sign up on corsight.com to receive a free daily email with insights from our global staff of analysts. Have a wonderful day and we'll see you next week.