Consumers Brace for Higher Food, Gas Costs

As food companies and restaurant operators attempt to keep from raising prices as a result of rising commodity and transportation costs, U.S. consumers are preparing to pay more for their food in 2011.

According to food market research by the NPD Group, which has tracked all aspects of consumer eating behaviors in and away from home for three decades, historically consumers have never let food costs rise faster than their incomes and have managed their food spending accordingly, whether choosing to eat at home or away from home.

“With food inflation accelerating in the last months of 2010 and government forecasts show it continuing into at least the first half of 2011, Americans will be making well-thought out choices this year on how they will feed themselves,” said Harry Balzer, author of “Eating Patterns in America” and NPD chief industry analyst. “It amounts to ‘relative food inflation.’ They have so much to spend on food and they will carefully pick and choose how they spend it – looking for more coupons and discounts, buying more private label foods, eating more leftovers and generally getting the most bang for their buck.”

According to NPD’s in-home research, National Eating Trends, and foodservice market research CREST, 72 percent of meals are prepared in homes, 18 percent are obtained from foodservice outlets, 8 percent are skipped and 2% are from unknown sources. Over the past two years, U.S. consumers pulled back on their use of restaurants, and the industry lost 2.4 billion visits from year ending November 2008 thru November 2010, from 61.5 billion visits to 59.1 billion visits. Food deflation during this period gave supermarkets the edge in terms of consumer food spending. As the economy has begun to improve, Americans have started adding more restaurant visits back into their routines, but high unemployment continues to hamper the industry’s growth.

“Food prices so far are up less than two percent from the depressed year ago levels, when they were dropping by 2 percent. Supermarket prices are still below the levels of 2008,” Balzer said. “This is really a story about the upheaval created by the 2008 food price increases. We have yet to see how it will play out this time.”

The NPD Group is the leading provider of reliable and comprehensive consumer and retail information for the food and beverage, foodservice and many other industries.