A fascinating and comprehensive article post recently by the American Farm Bureau Federation’s economist Daniel Munch states that stats from the USDA show significant changes in food purchasing behavior by consumers both at retail and in a restaurant setting.
The full article can be accessed at https://www.fb.org/market-intel/usda-data-reveals-shifts-in-food-purchasing-behavior .
Munch wrote, “A lot happens between when a crop is harvested or a cow is milked and when a consumer sits down for breakfast. Generational trends influence how and where people enjoy eating and the convenience of accessing and transporting food shifts how farmers and ranchers market their goods and build relationships with processing facilities and retail outlets. Market-moving events, like COVID-19 or rising inflation, disrupt these trends and have often exposed new or unexpected avenues for consumption.”
He went on to cite the USDA-Economic Research Service’s (ERS) Food Expenditure Series, which “tracks the value of the U.S. food system by reporting on total food and beverage spending.”
The data is categorized as “food consumed at home or food consumed away from home, such as at restaurants or hotels,” and for both categories spending has been further narrowed by the “type of retail or food service outlet from which food and beverages were purchased.”
Munch noted that between 1997 and 2022 “total nominal spending on food at home increased from $376 billion across the nation to $1.047 trillion, a 178 percent increase and an average annual increase of 4 percent.” He added that during that same period, “… food away from home increased from $336 billion to $1.343 trillion, an almost 300 percent increase and an average annual increase of 6 percent.”
Also in the period between 1997 and 2022 “the consumer price index for food increased 95 percent, meaning inflation explains much of the increase in food spending across both categories, though there are other factors. Total food away-from-home spending has surpassed food-at-home spending since 2007, except for a flip in 2008 during the onset of the Great Recession.
From 2015 to now, “food away from home spending has exceeded food at home spending by over $100 billion, except during 2020 when COVID-19 lockdowns prevented many consumers from consuming food in public settings,” Munch said. And between 2019 and 2020 food at home spending increased 8 percent while food away from home spending dropped 13 percent, the largest drop in the data series.
The reopening of many food service outlets in 2021 and 2022 rebounded food away-from-home spending 25 percent and 15 percent, respectively, he added.
Munch went on to cite additional USDA stats, commenting on trends prior to COVID and after.
“These trends are not surprising to many of us as restaurants and quick service options have played an increasing role in U.S. consumption culture. As convenience and time savings drive purchasing behavior, many of us prefer to grab a bite at a restaurant or through takeout options than to cook for ourselves,” he said.
He pointed out that while “the cost of many restaurant meals exceeds that of home-cooked recipes, the growth in low-cost, quick service options has lowered the cost barrier for consumers, further contributing to growth in spending away from home.”
The COVID lockdowns “revived at home consumption and cooking a bit,” but “away from home spending in 2022 surpassed home spending by nearly $300 billion, the highest recorded margin.”
The AFBF economist also looked at grocery store purchases, which he said continue to garner the largest market share “though this share has decreased significantly.”
He noted, “In 1997, grocery stores accounted for 72 percent of food at home expenditures. This dropped to 65 percent five years later in 2002 and to under 60 percent in 2007. In 2022, grocery stores took up 54.2 percent of at home food spending. The only time grocery stores’ market share has increased since 1997 is between 2019 and 2020, a likely result of people returning to grocery outlets amid lockdowns. Much of the decline in grocery store market share for at home spending has been the growth of warehouse clubs and supercenters and home delivery. Including popular bulk shopping centers like Costco and Sam’s Club, this category increased its market share from 8 percent in 1997 to 25.5 percent in 2012.”
Bulk buying and cost savings have contributed to “the growth of the warehouse segment.” And he added, “Bulk shopping centers’ over-a-quarter-of-the-market capture was then reduced by the entry of popular home delivery options between 2012 and 2017. In 2012, home delivery spending made up only 2.7 percent of at home food spending; by 2017 that share had risen to 6.1 percent. In 2022 warehouses and supercenters claimed 22.4 percent of food at home expenditures and mail order and home delivery claimed 8.8 percent.”
Dollar value increases were also noted. “Between 1997 and 2022 food expenditures at grocery stores increased from $270 billion to $567 billion, a 109 percent increase,” Munch said. “During the same period, spending at warehouse clubs and supercenters grew from $30 billion to $234 billion, a 679 percent increase. Similarly, spending on food delivery increased 684 percent from $11 billion in 1997 to $91 billion in 2022.”
Munch said that in a “consumer environment where convenience is king, it is likely delivery food expenditures will only increase, though a recessionary period could drive a return to money-saving options.”
Looking at food consumed away from home, he wrote that “… limited-service restaurants and full-service restaurants have fought for the top market share spot in terms of spending. Limited-service restaurants include outlets where customers typically order and pay in advance at a counter and guest-server interaction ends when the food is provided… [and] full-service restaurants include your traditional sit-down experience where waitstaff provide service from taking your order to receiving payment, as well as catering services.”
Both foodservice options “had an average market share of 34 percent of food spent away from home between 1997 and 2022. The largest difference in these two categories occurred between 2019 and 2020 when limited-service restaurants claimed 38 percent of food away from home spending and full-service 29 percent, again linked to the COVID-19 lockdowns.”
And, he wrote, “Limited-service restaurants were able to take advantage of their structure, which reduces touch points between customers and employees. Drive-through options, app ordering and pickup availability are a few structural advantages many limited-service restaurants already had in place before restrictions went into effect. These dynamics buffered losses compared to full-service restaurants.”
Food bought and eaten at retail outlets or vending machines has seen the biggest jump in market share, Munch said. “Making up only 4 percent of away from home expenditures in 1997, this category hit its peak in 2020 at 14 percent and made up 11 percent of away from home spending in 2022.”
Dollar values between 1997 and 2022 for food expenditures have increased from $120 billion to $462 billion at full-service restaurants (a 283 percent increase).
“Limited-service restaurant spending has increased from $112 billion to $468 billion (a 317 percent increase),” Munch wrote. “During the same period, spending at retail stores and vending has increased from $11 billion to $154 billion, a 1,114 percent increase. Much consideration will be given to whether or not the experience of a full-service restaurant is able to offset the cost benefits and convenience of competing options, factors heavily linked to the cash access of consumers.”
He pointed out that food buying behavior “also varies by state and region. Per capita food at home spending was highest in Maine ($3,860), New Hampshire ($3,248), Iowa ($3,103) and Colorado ($3,064) and lowest in Arkansas ($1,920), South Dakota ($1,997) and Mississippi ($2,007).” Munch said that “much of the at home spending distribution by state appears to be to a combination of average food prices in a state and a cultural preference for eating at home.
And he said, “New York and Hawaii have high comparative food costs but show up in the bottom 10 states for food at home spending, likely linked to a cultural preference for eating away from home in more urbanized and tourist-heavy economies.”
“How and where shoppers purchase food impacts the way in which food is transported, stored, packaged, prepared and ultimately consumed,” he wrote. “Shifts in these conditions linked to local and global economic conditions, as well as preference changes, introduce uncertainty for those attempting to establish marketing strategies.”
Moreover, “Recent spending trends reveal a continued desire for convenience in eating experiences, favoring options that save time and money. Future higher cash access for consumers may shift food consumption toward immersive full-service away-from-home experiences. This would contrast with the COVID-19 contact-sensitive environment that demanded fewer contact points between the public.”
Munch concluded, “A future with lower cash access and negative economic indicators would lead to a continued trend demanding low-cost and low time-intensive options. In any case, farmers and ranchers must remain aware of consumer preferences in the way they purchase food in order to optimize market access and revenue-generating potential.”
