Consumer food trends have shifted
We seem to hear plenty about how the COVID-19 pandemic has changed people’s lives as we try to migrate more towards normal. One thing is for certain, in the past two years consumer trends have shifted. That is also evident in consumer food trends as we examine a report issued by the American Farm Bureau.
USDA-Economic Research Service’s (ERS) tracks the value of the U.S. food system by reporting on total food and beverage spending. This spending data is categorized as food consumed at home or food consumed away from home, such as at restaurants or hotels.
Between 1997 and 2022 total nominal spending on food at home increased from $376 billion across the nation to $1.047 trillion, a 178 percent increase and an average annual increase of four percent. During the same timeframe, food away from home increased from $336 billion to $1.343 trillion, an almost 300-percent increase and an average annual increase of six percent. Between 1997 and 2022, the consumer price index for food increased 95 percent, meaning inflation explains much of the increase in food spending across both categories, though there are other factors. Total food away from home spending has surpassed food at home spending since 2007.
Since 2015, food away from home spending has exceeded food at home spending by over $100 billion, except during 2020 when COVID-19 lockdowns prevented many consumers from consuming food in public settings. Between 2019 and 2020 food at home spending increased eight percent while food away from home spending dropped 13 percent, the largest drop in the data series. The reopening of many food service outlets in 2021 and 2022 rebounded food away from home spending 25 percent and 15 percent, respectively. Before 2010, food away from home spending increased five percent annually compared to four percent for food at home. After 2010, food away from home spending increased seven percent annually compared to four percent for food at home. Removing the 2020 COVID-19-linked outlier pushes average annual food away from home spending increases to nine percent.
These trends are not surprising to many of us as restaurants and quick service options have played an increasing role in U.S. consumption culture. As convenience and time savings drive purchasing behavior, many of us prefer to grab a bite at a restaurant or through takeout options than to cook for ourselves. While the cost of many restaurant meals exceeds that of home-cooked recipes, the growth in low-cost, quick-service options has lowered the cost barrier for consumers.
For food consumed at home, grocery stores have consistently captured the largest market share, though this share has decreased significantly. In 1997, grocery stores accounted for 72 percent of food-at-home expenditures. This dropped to 65 percent five years later in 2002 and to under 60 percent in 2007. In 2022, grocery stores took up 54.2 percent of at-home food spending. The only time grocery stores’ market share has increased since 1997 is between 2019 and 2020, a likely result of people returning to grocery outlets amid lockdowns. Much of the decline in grocery store market share for at home spending has been the growth of warehouse clubs and supercenters and home delivery. Including popular bulk shopping centers like Costco and Sam’s Club, this category increased its market share from eight percent in 1997 to 25.5 percent in 2012. Bulk shopping centers’ over-a-quarter-of-the-market capture was then reduced by the entry of popular home delivery options between 2012 and 2017. In 2012, home delivery spending made up only 2.7 percent of at-home food spending; by 2017 that share had risen to 6.1 percent. In 2022 warehouses and supercenters claimed 22.4 percent of food-at-home expenditures and mail order and home delivery claimed 8.8 percent.
These trends are further revealed in dollar value increases. Between 1997 and 2022 food expenditures at grocery stores increased from $270 billion to $567 billion, a 109-percent increase. During the same period, spending at warehouse clubs and supercenters grew from $30 billion to $234 billion, a 679-percent increase. Similarly, spending on food delivery increased 684 percent from $11 billion in 1997 to $91 billion in 2022. In a consumer environment where convenience is king, it is likely delivery food expenditures will only increase.
For food consumed away from home, limited-service restaurants and full-service restaurants have fought for the top market share spot in terms of spending. Both outlet types had an average market share of 34 percent of food spent away from home between 1997 and 2022. The largest difference in these two categories occurred between 2019 and 2020 when limited-service restaurants claimed 38 percent of food away from home spending and full-service 29 percent, again linked to the COVID-19 lockdowns.
Food purchased and consumed at retail outlets or through vending machines has had the largest increase in market share. Making up only four percent of away-from-home expenditures in 1997, this category hit its peak in 2020 at 14 percent and made up 11 percent of away-from-home spending in 2022. Many retail outlets historically specializing in just merchandise sales have attempted to diversify income streams by offering in-store food consumption or take-away options.
In dollar terms, between 1997 and 2022 food expenditures have increased from $120 billion to $462 billion at full-service restaurants (a 283-percent increase). Limited-service restaurant spending has increased from $112 billion to $468 billion (a 317-percent increase). During the same period, spending at retail stores and vending has increased from $11 billion to $154 billion, a 1,114-percent increase.
Food spending behavior also varies by state and region. Much of the at home spending distribution by state appears to be to a combination of average food prices in a state and a cultural preference for eating at home. Maine and New Hampshire, for instance, have high rural populations and high food prices, likely contributing to a higher percentage of people eating at home at a higher cost. Likewise, New York and Hawaii have high comparative food costs but show up in the bottom 10 states for food at home spending, likely linked to a cultural preference for eating away from home in more urbanized and tourist-heavy economies.
Each state’s and region’s characteristics contribute to how food is marketed and transported and requires producers to adjust business strategies accordingly.
How and where shoppers purchase food impacts the way in which food is transported, stored, packaged, prepared and ultimately consumed. Shifts in these conditions linked to local and global economic conditions, as well as preference changes, introduce uncertainty for those attempting to establish marketing strategies. Recent spending trends reveal a continued desire for convenience in eating experiences, favoring options that save time and money. Future higher cash access for consumers may shift food consumption toward immersive full-service away-from-home experiences. This would contrast with the COVID-19 contact-sensitive environment that demanded fewer contact points between the public. A future with lower cash access and negative economic indicators would lead to a continued trend demanding low-cost and low time-intensive options.
“Part of the secret of a success in life is to eat what you like and let the food fight it out inside.” -Mark Twain
Ron Kern is the manager of the Ogle County Farm Bureau.