Grocery Prices Rise as Retail Promotions Shrink

As pandemic-strained consumers keep moving online and seeking value, grocery prices keep increasing, according to new figures from Nielsen.

It found that in September, consumers paid 3.5 percentage points more for the same popular grocery items than was the case for the same month last year. In August 2020, the year-over-year price increase was 4.1 percentage points. This data is inclusive of in-store purchasing, curbside pickup and home delivery.

“Fewer promotional offers are being made available to shoppers, and this is the reason their grocery bills are higher than this same time last year,” the Nielsen report said about the September figures.

On average, 31.4% of all units sold in the U.S. are purchased on some sort of promotion, Nielsen said. By the end of September 2020, only 25.9% of units were sold on promotion. This decline means shoppers have less opportunity to purchase items on sale and save at the register.

The lack of promotions is most prevalent in the household care department, where only 15% of items are being sold on promotion, nearly half the amount seen prior to the pandemic. In the grocery department, units sold on promotion are down 10 percentage points vs. pre-pandemic levels, Nielsen said.

The frozen department’s promotional activity moves in step with the total store and remains stagnant in September, 7 percentage points from pre-pandemic levels. The meat department witnessed a resurgence of promotional activity during the summer, but has reverted to lower levels since pre-pandemic times in recent weeks.

Prices lowered during Labor Day week as promotions predictably increased, but the post-Labor Day decline in promotional activity is resulting in a recent increase in total prices.

According to a recent Progressive Grocer column from Jon Hauptman, senior director, retail analytics at Winston-Salem, North Carolina-based Inmar Intelligence, value shoppers — including online ones — are increasing as the economy continues to struggle. Additionally, since health concerns have remodeled the value equation, driving more consumers online for their grocery shopping, the challenge to consistently activate these shoppers has become increasingly complex.

One solution for food retailers? According to Hauptman, spotlight on-sale products that are relevant to shoppers based upon their past purchases and demonstrated preferences.