Americans are spending an awful lot on food thanks to the ongoing impact of inflation — so much so that groceries haven't been a greater chunk of their budgets since the 1990s.
US consumers spent 11.3% of their disposable income on food in 2022, The Wall Street Journal reported on Wednesday, citing data from the US Department of Agriculture. The last time food made up as much of their spending was in 1991, the Journal reported.
It's not got much better since then. While inflation has slowed down a tad — with some products like cars and appliances getting more affordable — prices are still increasing, and the cost of many food items remains lofty. Beef and sugar are among ingredients that are still comparatively expensive, for instance, the Journal reported. And the cost of eating out rose 5.1% year-on-year in January 2024 — way ahead of the overall inflation figure of 3.1%.
Consumers are still reeling from "the historically high level of inflation that has accumulated over the last two years," François-Xavier Roger, Nestlé's CFO, said during the company's earnings call on Thursday. Despite it moderating, shoppers still bought fewer products as prices stayed elevated, Roger said.
It looks like elevated food costs will likely stick around, too.
One restaurant owner in Georgia told Business Insider last month that higher rent, ingredient costs, and employee pay have all forced him to raise prices. That has led to some customers stopping by less often for a BLT, which has hurt sales, he said.
"The part people don't understand is that even if inflation comes down, the damage is already done," Brian Will, the restaurant owner, said.
Some companies haven't hiked prices. Instead, they've cut the size of packages, giving consumers fewer chips or less soda for the same price — a practice known as "shrinkflation." But many are just getting used to charging more.
Kellanova CEO Steve Cahillane compared the recent food inflation to gas prices that have risen over the last two decades: "It becomes the new price, and people get begrudgingly used to it," he told the Journal.
