KANSAS CITY, MO — Inflation is not for the faint of heart. The soaring gas prices at the pump. The skyrocketing cost of milk and eggs at the grocery checkout. The gut punch of a restaurant check. For consumers, the stress of it all is overwhelming and all-consuming.
Widespread concern means continued money-saving measures, especially among lower-income households, and commercial baking hasn’t been immune to the marketplace pressures, according to Anne-Marie Roerink, founder and principal of 210 Analytics.
“Inflation is real and has taken a tremendous bite out of people’s ability to spend — whether on food, travel, appliances, etc. — and we’re seeing declines in units and volume sales everywhere,” she said.
In March, the University of Michigan Consumer Confidence Index, which surveys how consumers feel about the economy, business and buying conditions, and personal finances, sank to 62 — the first decline in four months — as consumers brace for what they expect to be a recession ahead.
Americans have been applying several cost-cutting strategies to offset rising costs at the grocery store, including buying what’s on sale (54%), cutting back on non-essentials (47%), looking for coupons (35%) and switching to store-brand items (29%), according to Circana data.
According to the Food Industry Association (FMI)’s US Grocery Shopper Trends 2023, more than two-thirds of shoppers say they spend more on groceries today compared to one year ago, and older consumers are increasingly the most worried about rising food prices, with 80% of baby boomers citing concern in February 2023, up from 69% in October 2022.
But not all inflation news is doom and gloom. To balance rising food costs, many consumers are eating more meals at home, and data from Circana indicates at-home food spending remains strong, with center store dollar sales up 11.1% and perimeter dollar sales up 6.3% in the last quarter of 2022.
And although a tight economic climate is causing shifts in spending behavior for cash-strapped shoppers, baked goods and snacks are still making their way into grocery carts. That’s because, according to the American Bakers Association (ABA)’s Life Through the Lens of Bakery 2022 report conducted by 210 Analytics, 64% of Americans make room in their budgets for an occasional baked treat, and 80% make baked goods part of special occasions.
Consumer engagement with the in-store bakery also appears to be performing well, despite inflationary challenges. In FMI’s inaugural Power of the In-Store Bakery 2022 report, findings revealed strong unit and dollar sales, up from the previous year, 7.4% and 14.4%, respectively. And, according to the report, 95% of shoppers eat from the in-store bakery at least occasionally with 63% doing so weekly. The biggest category standouts in dollar sales growth included muffins (24.2%), cupcakes (23.6%) and cookies (21.7%).
So, what’s driving consumers to keep splurging on their weekly coffee and $7 pastry from the corner bakery while pinching pennies elsewhere? The answer may lie in the concept of affordable indulgences.
This story has been adapted from the 2023 New Products Annual issue of Commercial Baking. Read the full story in the digital edition here.
