Despite Inflation, Fresh Items Account for Almost Half of Shoppers’ Baskets

Symphony RetailAI, a global provider of integrated AI-powered marketing, merchandising and supply chain solutions for fast-moving consumer goods retailers and manufacturers, has revealed new findings from an in-depth analysis of consumer shopping data: Across departments, price inflation is more common in fresh grocery categories (see infographic at bottom). With inflation considerably higher for fresh items than for frozen and ambient or shelf-stable products, price-sensitive shoppers are buying less meat, poultry and dairy but are still prioritizing fresh produce purchases.

Last November, Symphony RetailAI’s “2021 Shopper Study: The Changing Customer Landscape,” a 12-month analysis of 2.2 billion shopper transactions across the company’s worldwide customer base of grocery retailers, found that many categories important to price-driven customers were underperforming. The new consumer insights are an extension of the earlier data analysis, looking more closely at these underperforming categories and how inflation is affecting sales of fresh items in particular.

According to Symphony RetailAI, inflationary price increases are much more prevalent in fresh than any other grocery category. In all departments, shoppers are spending more for their groceries, but a considerably larger portion of price increases for fresh items are because of inflation, not customer choice. Most of shoppers’ additional spend across categories is driven by product mix: Consumers are buying more expensive products because of changes that a retailer has made to the assortment, or because the customer has chosen to purchase a more premium product. At the store level, just 26% of the additional consumer spend is driven by increases in the base price. When analyzing fresh separately, however, Symphony RetailAI discovered that nearly half of the average price increase (45%) is caused by inflation, which is significantly more than in both the frozen and ambient categories (both 18%) and in beverages (24%).

Further findings from Symphony RetailAI’s analysis include:

Due to inflation, traditional grocers are losing shoppers in the meat, poultry and dairy categories. When looking at shopper data and category bounce-back since COVID-19, meat, poultry and dairy in particular are underperforming with price-sensitive shoppers, meaning that the prices are too high for many price-sensitive shoppers to buy. As a result, traditional grocers have to be strategic with price and promotional strategies, because of the declining customer base for these categories.
For every 10 items in a shopper’s basket, four are fresh products. Fresh is critical to grocery shoppers, as shown by the fact that shoppers on average have seven times more fresh items in their baskets (43%) than items from the frozen category (6%). By contrast, the ambient or shelf-stable category accounts for 29% of shoppers’ baskets.
The fresh category is a frequency driver. When it comes to monthly purchase frequency, fresh items (24.8%) are purchased about as often as ambient products (22.5%), but twice as often as frozen (11.1%).
Fresh is seeing higher levels of customer growth than other grocery categories. Fresh categories experienced 8% growth in shopper households over the course of one year, compared to 7% for ambient, shelf-stable products, 6% for beverages, and 5% growth for the frozen category.

“As evidenced by these insights, a limited view of aggregate shopper behavior across the store won’t lead to optimized decisions around price and promotional investments, especially with inflation impacting some categories more than others, as seen with meat, poultry and dairy,” noted Charisse Jacques, SVP global customer-centric retail services at Dallas-based Symphony RetailAI. “Retailers need a shopper-centric, AI-powered approach to differentiate their item and category strategies based on the importance of price or promotions to a given customer segment. If an item is extremely important to price-sensitive customers, the retailer can ensure the item is priced well to reverse any lost perception of value and further promoted to drive traffic and sales.”