From BOGO offers on Greek yogurt to 50% off candy canes in the days following the holiday shopping season, discounts are a constant presence in grocery stores across the country. The question isn’t so much if supermarkets are offering them, but how many and for which items.
Relative to years past, however, deals on food and beverages are few and far between, and an underperforming supply chain is part of the reason why.
During the penultimate quarter of 2019, approximately one-quarter (25.7%) of the items sold by grocers nationwide, on average, were on sale. Three years later during the same three-month period, it’s down to just 20.6%, The Wall Street Journal reported from data collected by Information Resources Inc.
The cause of the discount decline is multifaceted. Some of it is attributable to inflation. With wholesale prices at decade-long highs, as evidenced by the Producer Price Index, retailers have less price flexibility since they’re spending more for items in order to turn a profit. In August, for example, the PPI for processed goods for intermediate demand rose 14.1% compared to 12 months earlier, according to the Department of Labor’s latest estimates.
But it’s also due to grocers not having enough merchandise in the pipeline to accommodate price cuts.
Kosta Drosos, general manger of Fresh Market Place based in in Chicago, told the Journal that he hasn’t advertised discounts on dairy products for close to five months. The same goes for many other grocery items, from soup ingredients to traditional sandwich condiments.
“It’s hard to run anything on promo,” Drosos said.
Demand remains elevated
Exacerbating limited supply is robust demand. Typically when consumer prices rise, demand tends to pull back — sometimes slightly, on other occasions substantially. Although families say that inflation is a concern for them, over 85% of respondents in a survey done by the Food Industry Association say their food spending is under control.
Fewer discounts, however, are making it more difficult to find bargains. As a result, a number of shoppers are changing up their buying behaviors. For example, 23% of respondents in the Food Industry Association poll said they’re starting to purchase more items in bulk.
It’s also influencing the kinds of foods grocery shoppers select for their meal planning. This includes Tennessee resident John Frey. A retiree living in Kingsport, Frey told the Journal he’s spending more time focusing on how prepare lunches and dinners on a budget. He’s also starting to freeze a number of foods so that they last longer while preserving freshness.
“It has changed the way I cook and prep,” Frey explained.
Despite fewer doorbuster deals and rapid inflation consumers are in good spirits overall. The Consumer Confidence Index in September reached 108, The Conference Board reported. That’s up from 103.6 in August. Additionally, over 18% of respondents said they expect they’ll be earning more money in the coming months, which is up from 16.6% in August.