Navigating a Divided Food Consumer
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A Divided Consumer: How Inflation and Behavior Shifts Are Reshaping the Food Industry
The U.S. food landscape is undergoing a period of rapid anduneven change, shaped by inflation, shifting consumer behavior, and structuraladjustments across both grocery and foodservice. While consumers remain highlyengaged with food, their purchasing patterns are increasingly split—creating a“two-track” market with clear winners and losers. As Tom Bailey of Rabobank putit, “consumers aren’t just splitting the check, they are splitting into twodifferent dining parties altogether, divided by income levels.”
Affordability Under Strain
Food inflation has risen more than 30% since 2020,significantly outpacing wage growth. This widening gap has created a relativeaffordability challenge: consumers are spending more of their budgets on foodwhile feeling like their money buys less. Foodservice prices have climbedespecially fast, prompting many households to reassess when—and where—theychoose to dine. This tension is reflected in consumer sentiment, whichcontinues to trend downward. People are increasingly aware of the trade-offsrequired in their weekly food decisions.
A Bifurcated Consumer Base
With budgets stretched, purchasing behavior is separatingalong economic lines. Higher-income consumers (those earning more than $200,000per year) continue to spend freely on convenience, premium brands, andexperience-driven foodservice. Meanwhile, middle-income and value-orientedshoppers are trading down, migrating toward more affordable grocery formats.
Traffic data highlights this divergence:
• Discount grocers and warehouse clubs are seeingsteady growth.
• Specialty and premium retailers remain resilient.
• Mid-priced formats—caught between value andpremium—face the most pressure. This split plays out across categories as well,from eggs to beverages, where private label growth and brand erosion arevisible.
The Rise of Private Label
Private label continues to gain momentum across U.S.grocery. Improved product quality, competitive pricing, and investment fromretailers have created a “private label growth loop” in which consumeracceptance fuels retailer expansion, which in turn drives supplier scale. Harddiscounters, particularly Aldi, are capitalizing on this dynamic and expandingrapidly.Category data shows private label strengthening in areassuch as refrigerated foods, general merchandise, frozen items, and householdgoods.
Consumers Are Changing—And Retail Is Adapting
Consumer priorities are shifting toward personalization,convenience, and perceived value. Time-use trends show Americans spending theirdays differently than they did 20 years ago, reinforcing demand forready-to-eat meals, delivery, and click-and-collect options.At the same time, certain brands continue to resonate—TraderJoe’s and emerging concepts like 7 Brew demonstrate that strong valuepropositions can still capture loyalty, even in a fragmented market.
Structural Forces to Watch
Health trends and regulatory pressures are also beginning toreshape demand. Rising GLP- 1 usage is influencing protein consumptionpatterns, and “better-for-you” initiatives may increase costs or limit certainingredients over time. Overall, the share of household spending devoted to foodis expected to increase.
What It All Means
The U.S. food consumer is splitting—financially,behaviorally, and attitudinally. Companies that succeed in this environmentwill avoid the squeezed middle and instead focus on one of two clear lanes: valueor premium. Innovation, convenience, and sharp price positioning will beessential as the industry navigates an era defined by economic pressure andrapidly evolving consumer expectations.
Affordability Under Strain
Food inflation has risen more than 30% since 2020,significantly outpacing wage growth. This widening gap has created a relativeaffordability challenge: consumers are spending more of their budgets on foodwhile feeling like their money buys less. Foodservice prices have climbedespecially fast, prompting many households to reassess when—and where—theychoose to dine. This tension is reflected in consumer sentiment, whichcontinues to trend downward. People are increasingly aware of the trade-offsrequired in their weekly food decisions.
A Bifurcated Consumer Base
With budgets stretched, purchasing behavior is separatingalong economic lines. Higher-income consumers (those earning more than $200,000per year) continue to spend freely on convenience, premium brands, andexperience-driven foodservice. Meanwhile, middle-income and value-orientedshoppers are trading down, migrating toward more affordable grocery formats.
Traffic data highlights this divergence:
• Discount grocers and warehouse clubs are seeingsteady growth.
• Specialty and premium retailers remain resilient.
• Mid-priced formats—caught between value andpremium—face the most pressure. This split plays out across categories as well,from eggs to beverages, where private label growth and brand erosion arevisible.
The Rise of Private Label
Private label continues to gain momentum across U.S.grocery. Improved product quality, competitive pricing, and investment fromretailers have created a “private label growth loop” in which consumeracceptance fuels retailer expansion, which in turn drives supplier scale. Harddiscounters, particularly Aldi, are capitalizing on this dynamic and expandingrapidly.Category data shows private label strengthening in areassuch as refrigerated foods, general merchandise, frozen items, and householdgoods.
Consumers Are Changing—And Retail Is Adapting
Consumer priorities are shifting toward personalization,convenience, and perceived value. Time-use trends show Americans spending theirdays differently than they did 20 years ago, reinforcing demand forready-to-eat meals, delivery, and click-and-collect options.At the same time, certain brands continue to resonate—TraderJoe’s and emerging concepts like 7 Brew demonstrate that strong valuepropositions can still capture loyalty, even in a fragmented market.
Structural Forces to Watch
Health trends and regulatory pressures are also beginning toreshape demand. Rising GLP- 1 usage is influencing protein consumptionpatterns, and “better-for-you” initiatives may increase costs or limit certainingredients over time. Overall, the share of household spending devoted to foodis expected to increase.
What It All Means
The U.S. food consumer is splitting—financially,behaviorally, and attitudinally. Companies that succeed in this environmentwill avoid the squeezed middle and instead focus on one of two clear lanes: valueor premium. Innovation, convenience, and sharp price positioning will beessential as the industry navigates an era defined by economic pressure andrapidly evolving consumer expectations.