Inflation is Cooling, but Prices are Hot: How Food Innovation Supports Shoppers

by | Mar 7, 2024

Although the rate of price increases is slowing, food shopping in North America still takes a toll on most wallets. Learn how expanding your brand’s plans for food innovation can help.

THE CURRENT STATE OF FOOD INFLATION

A global survey from Innova reveals that food security (the availability of affordable, healthy, nutritious food) is a top concern for people, raised by nearly 1 in 3. Food inflation statistics explain the impact in North America:

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The U.S. Bureau of Labor Statistics reports January 2024 grocery prices were 25% above January 2020 levels, outpacing the 19% overall price inflation occurring during the same time.

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Canada’s 2024 Food Price Report predicts shoppers will pay $700 more for groceries. Prices may be rising more slowly but are still higher than last month or last year, and shoppers are feeling the impact.

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In a recent survey, two-thirds of U.S. registered voters agreed food price inflation is affecting them more than gas or rent price increases. Almost 80% of Canadians indicated high concern about the cost of living with food prices at the top of the list (Innova).

WHERE IS FOOD INFLATION HEADING IN 2024?

Predictions for price easing are cautious. “Inflation has cooled significantly relative to earlier boomy highs from the past few years but still remains above target,” states Michael Feroli, Chief U.S. Economist at J.P. Morgan. “Absent a recession next year, we don’t see inflation getting all the way back down to [the targeted] 2%.” J.P. Morgan Research forecasts the 2024 global core inflation rate will stay around 3% in 2024.

SHOPPER RESPONSE TO FOOD INFLATION

A recent Wall Street Journal article explored reactions to higher food prices. People are shifting from the initial frustration of sticker shock to taking actions like:

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Cutting back on dining out

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Cooking simpler foods with fewer (and often less expensive) ingredients

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Buying in bulk and cooking in freezable batches

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Using coupons or shopping on discount days

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Sifting through bargain bins or visiting dollar stores

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Shifting from brands to private label “dupes”

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Reducing purchases of organic products

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Trading out or “padding” meat consumption with alternative proteins like lentils or beans

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Eliminating more expensive snacks

Although savvy shoppers are finding ways to mitigate higher prices, some acknowledge decisions have downsides. “[Tuna-noodle casserole is] just egg noodles, canned tuna, canned cream of mushroom soup, onions, and garlic,” said a 54-year-old marketing professional in Las Vegas. “It’s not healthy, but it’s food.”

The prolonged period of financial stress is affecting attitudes and well-being, leading some people to experience “inflation isolation.” A Q4 2023 survey of Canadians about the effects of inflation revealed that half spent more time at home, more than one-third were socializing less, and about 20% felt socially isolated.

“Inflation is not only an economic phenomenon, it’s also a psychological one, because it’s a psychological proxy for things being out of control.”

William Galston, Political scientist, The Brookings Institution

HOW FOOD INNOVATION CAN RETURN CONTROL TO SHOPPERS

While some brands respond to inflation with price increases, “shrinkflation,” or “skimpflation,” upending the usual way of thinking could be a key to a successful 2024.

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Brands can create connections through food innovation that demonstrates an understanding of needs. Functionality that aligns with health and wellness goals like energy, sleep, and comfort will attract and retain shoppers.

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Our examination of cultural and behavior shifts affecting food innovation in 2024 encouraged brands to find the balance between quality and affordability. People want to feed their families foods and beverages with fewer negatives like added or artificial sweeteners and more positives like protein or fiber.

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Food innovation around seasonal or limited-time offers gives people an affordable “little treat” that delivers welcome joy and a respite from stress.

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Although AI and AR (augmented reality) applications in food innovation are still evolving, some brands are investing in technology that provides trend-driven, personalized products. Incorporating AR into food packaging can improve engagement with product details or interactive activities.

Image: Technavio Research

TACTICS FOR SPEEDING FOOD INNOVATION

Agility is critical to maintaining momentum in a rapidly changing landscape where shoppers are informed and sometimes impatient. Food innovation can become nimbler using the following tactics:

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Explore co-creation that demonstrates you’re listening to shoppers. A recent Forbes survey showed almost 90% of people agreed that they are motivated to buy when they feel involved and part of the brand team.

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Evaluate technological capabilities like 3D printing to help shoppers personalize the products they purchase. Nourished offers 7-layer customized gummies filled with desired nutrients.

Image: Nourished.com

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Speed the decision-making processes in your new product development plan. Your NPD activities become more efficient by framing your goals, brand guardrails, and objectives and getting stakeholder alignment.

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Partner with suppliers that can support rapid prototyping, with quick turns on ingredients, flavor samples, and documentation needed for commercialization.

Several food and beverage companies that participated in the 2024 CAGNY (Consumer Analyst Group of New York) meeting plan to step up innovation. Many are pledging to “meet people where they are and address needs” with new capabilities to create value.

CONNECT WITH YOUR SHOPPERS THROUGH FOOD INNOVATION

Being an innovator is not for the faint of heart in any year, and 2024 promises to have more than a few challenges. Brands are still experiencing the shadow of supply chain disruptions, pandemic response, and historically high inflation. Frustrated and weary shoppers fill the marketplace and are turning to myriad online and in-store resources to make purchase decisions about foods and beverages. Although the current dynamics may seem out of control, you can succeed in the “Wild West” of food innovation by tuning in to ideas that resonate with shoppers.

If you need support with flavor solutions for your food or beverage innovation, reach out to the FlavorSum team. You’ll have access to the insights, flavor creation, application expertise, and commercialization support you need to unlock growth for your brand.

Author

Lisa Jackson

Lisa Jackson, Director of Marketing at FlavorSum, brings more than 30 years of market and consumer research experience to support innovation activities for food and beverage organizations.

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