Consumers Fed Up With Food Costs Are Ditching Big Brands

After years of price increases, food companies say more consumers pull back; fast-food chains and snack makers plan new deals and flavors

By Heather Haddon and Jesse Newman of The WSJ. 

Seems like the law of demand at work. Prices go up, quantity demanded going down (although we are supposed to be hold all other factors constant, like incomes-but those have been generally rising lately even if not much more than inflation). One passage, though, says "shoppers are now contending with lower food-stamp benefits." That suggests that not everything else is being held constant.

Excerpts from the article:

"Consumers are voting with their wallets—and some of America’s best-known food brands are losing. 

Coffee drinkers are leaving Starbucks’s loyalty program. Chips Ahoy cookies are lingering longer on grocery-store shelves. Fewer customers are ordering at fast-food drive-throughs and kiosks, pressuring companies such as Wendy’s and McDonald’s. 

For about three years following the Covid-19 pandemic, food companies pushed through a series of sharp price increases, saying they needed to recoup their own rising costs—and that consumers would adjust to stick with their favorite brands. As a result, the portion of U.S. consumers’ income spent on food has reached the highest level in three decades.

Now, some consumers are hitting their limits. Restaurant chains and some food manufacturers are reporting sliding sales or slowing growth that they attribute to consumers’ inability—or refusal—to pay prices that are in some cases a third higher than prepandemic times."

"Fast-food prices in March were 33% higher than 2019 levels, according to the Labor Department, while grocery prices were up 26%.

U.S. fast-food traffic declined 3.5% in the first three months of this year compared with the same period in 2023"

"U.S. grocery sales of food and beverages fell 2% by volume for the 52 weeks ended April 20 compared with the year-ago period"

"At Starbucks, U.S. traffic dropped 7% in the three months ended March 31, the steepest quarterly decline since at least 2010."

"its active loyalty-rewards users declined by 1.5 million members from the end of the first quarter to the end of the second."

"Kraft Heinz said Wednesday that its quarterly sales fell 1.2%"

"Kellanova, which makes Pringles and Pop-Tarts, said Thursday that North American sales volumes slid 5% after the company increased prices by the same amount."

"shoppers are now contending with lower food-stamp benefits and higher interest rates—along with general inflation."

"Chips Ahoy is losing ground to cheaper store-brand chocolate-chip cookies."

"McDonald’s and Starbucks plan to launch more promotions and communicate them more clearly to consumers."

Additional information:

"Wages and salaries increased 4.3 percent for the 12-month period ending in March
2024"

From  Employment Cost Index Summary.

"The non-seasonally adjusted CPI was 312.332 in March and 301.836 in March 2023. That was up 3.5%."

From The Seasonally Adjusted CPI Was up 0.38% in March.