Despite Value Focus, Food and Beverage Growth Potential Remains
Consumer concerns about inflation and overall economic uncertainty aren’t going away anytime soon but that doesn’t mean that the food and beverage market is declining or mostly stagnant. That’s one takeaway from a new report from Chicago-based insights and technology firm Circana.
The year 2025 may wind up similar to 2024. According to the latest "Circana Compass" insights, overall food and beverage dollar sales rose 2.5%, price/mix edged up 1.6% and volume sales increased 1.1% in 2024, mainly tracking as predicted. For the coming year, the company projects that the food and beverage industry will see a 2% to 4% lift in dollar sales, a 1.5% to 3.5% boost in price/mix and a likely flat 0% to 1% uptick in volume sales growth.
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Circana’s researchers cite a mix of general market conditions and shoppers’ own interests and behaviors for the moderate growth in these sectors. “We have seen consumer confidence rising slowly but they are still facing compounded impacts of the macroeconomic condition. This slight uptick in consumer confidence combined with pervasive value is providing sales increases in other sectors, in addition to CPG. However, what and where consumers are buying across all sectors has changed due to these factors,” Sally Lyons Wyatt, global EVP and chief advisor at Circana, told Progressive Grocer.
As they face ongoing market headwinds and hopefully emerge from the inflationary era, shoppers are also making food and beverage choices based on their shifting priorities.
“Consumers are concerned about pricing, but lifestyle is also playing a key role. These changing dynamics have fundamentally changed how consumers define value, creating what we call “unscripted consumer,” Lyons Wyatt noted. “These are people who don’t follow the usual spending patterns we’ve seen in other periods when growth has slowed. They are spending more money on food at home and less money and food away from home. They're making more trips to the store, but they're buying fewer items per trip, so it's more of just-in-time consumption. It's not all about saving money; there is a lot of bifurcation going on.”
That bifurcation helps explain consumer resilience during years of challenges, as people trade down or across in the products they buy but don’t want to sacrifice the eating and drinking experience. It also supports the parallel strength of store brands and ongoing innovation among CPGs.
“People are embracing private brands, which have seen a 3% uptick in sales. However, consumers also are spending more money on premium (up 2%) and super premium up (4%) national brands. It’s all about saving money in one area and splurging in another. For instance, a consumer may want to splurge on a premium pasta sauce and save money with a private-brand items from the baking aisle,” Lyons Wyatt explained. Additionally, value-seeking consumers are taking advantage of value offerings in the e-commerce space, where online transitions now drive 35% of food and beverage dollar sales growth despite holding a 10% market share.
Circana based its outlook for 2025 on research including consensus from economists who foresee softer growth for gross domestic product and disposable income, a slightly weakening job market and stable consumer confidence. “If economic conditions outperform expectations, we may see a slight decrease in volume growth as consumers dine out more, coupled with a stronger price/mix driven by demand for premium experiences. Conversely, weaker-than-expected conditions could reinforce in-home meal preferences but reduce willingness to pay for premium products,” the researchers wrote.
