Food Inflation Eating Into Supermarket Sales

March 10, 2010

Food Inflation Eating Into Supermarket Sales

Although sales at the nation’s grocery stores during January increased six-tenths of a percent from a year earlier to $44.5 billion, when that figure is deflated by the Food Institute’s Grocery Store Price Index, which measures inflation at the supermarket level, sales actually declined by 2.2%. That marked the nineteenth consecutive month that these so-called Real Sales declined from year earlier levels – the longest string of declines ever recorded by the Food Institute which has tracked sales in this manner for the past 30 years and has been following food industry economic trends since 1928. This reflects not only a much more budget conscious consumer but the 1.9% decline in food-at-home prices reported by the government for January. 

For all of 2009, these deflated sales dropped 3.1% from 2008 on an annualized basis according to updated data from the Food Institute, but fell a record-high 7.7% during February of 2009 alone.  Looking ahead, it is not likely that such a decline was repeated this February, particularly because of the extremely sharp drop recorded in 2009 and a possible return to somewhat higher food prices this year. Severe weather across the country last month likely did impact sales as well, having nothing to do with deflation, But with many consumers being forewarned of the storms, some retailers certtainly benefitted from shoppers stocking up in advance to make sure their pantries were well stocked and their battery supplies replenished.

On the foodservice side, these “real” sales at eating and drinking places declined 1.4% during January when deflated by the Food Institute’s Eating and Drinking Place Index which measures inflation at the restaurant level. That compares to two-tenths of a percent increase in actual sales as reported by the U.S. Census Bureau last month.  Prices for food-away from home during February were up 1.9% from a year earlier however, indicating that the drop in eating and drinking place real sales was attributable to a lack of diners, not lower prices.

Look for grocery stores and restaurants to continue to compete for food expenditures this year in a highly competitive marketplace. And don’t forget to check out the Food Institute website. 

The Food Institute also just announced a new webinar on Apr. 15th that will look at how retailers can benefit by helping customers eat at home more. It is based on a new study called Eating In sponsored by the Coca-Cola Retailing and Research Council - North America, that will give retailers a solid platform to build a fact-based strategy and dozens of fresh insights and actions retailers can take as they focus on making it easier and more beneficial for their customers to eat more meals at home. Just go to to sign up or find out more about this upcoming event.