Shopping stress is rising again, driven this time not by COVID-19 but by the higher cost of food (figure 1). Inflation affects almost everything for the consumer, from where they shop to what they buy. And that, in turn, is affecting the revenue and profitability of a food industry that is trying to adapt. But, for fresh food producers and grocers looking to compete on more than just price, there may be a bright spot: consistent demand for health and wellness.

While price is swamping the importance of other purchase drivers, 84% of consumers still consider health and wellness when purchasing fresh food (methodology). Three in four are actively seeking more personalised nutrition, up 13 percentage points year over year. Moreover, 55% of consumers say they are willing to pay a premium for the right foods because they contribute to their health and wellness.

Saying health and wellness are important is one thing. Putting food to use in preventing and treating specific health needs is another. Information, access, and ease of use are currently barriers the food industry should address.

Fortunately, food producers and retailers may have an opportunity to help consumers overcome these barriers while improving the top and bottom lines. Many consumers say they trust their grocer and would be willing to share some of their medical data and use technology for personalised nutrition.

However, given today’s inflationary environment, the opportunity offered by health and wellness likely cannot be fully understood outside the context of price.

The primacy of price

During the heart of the pandemic, the three Ps—price, preference, and perishability—drove a shift toward frozen foods relative to fresh.¹ Now, with rising inflation, price overshadows almost everything.

For instance, as of July 2022, dollar sales growth in frozen equivalents outperformed fresh food sales year over year. However, on a units-sold basis, both categories shrank, with frozen equivalents declining more than fresh.² Why? The likely answer is price inflation. Though starting from a lower absolute price, frozen equivalents experienced about double the price inflation as fresh, and consumers in the survey appear to have noticed (figure 2).

Perishability is still relevant but now more of a pocketbook issue. Nearly eight in 10 (78%) consumers consider food waste, likely out of a desire to minimise spending. Lower-income consumers and those using food assistance programs care the most about food waste as a purchase driver—again, suggesting it is a response to higher prices.

In several respects, preference also became a function of price, affecting how consumers view other priorities. Like the pandemic, price inflation is drowning out other considerations. As purchase drivers, sustainability, locally-grown, and non-GMO are lower than their prepandemic levels (down at least 12 percentage points from 2019). Note that each comes with price premiums that fewer consumers are now willing to pay (for more details, see Appendix A: Revisiting fresh food consumer personas

How are customers handling price inflation?

Nine in 10 (92%) consumers who recognise price inflation are deploying various strategies to adapt, such as trading to private labels, changing basket size and mix, and cherry-picking sales from multiple stores.

Pulling back on spending

• Nearly half (46%) are buying fewer expensive food items.
• 40% focus on reducing their food waste, taking measures to consume more of what they purchase. The lower a consumer's income, the more likely they will reduce waste.

Buying cheaper

• Approximately a third of consumers are trading down. Some are switching from name brands to private labels (38%), especially in rural areas (45%).
• Almost one in five are swapping fresh for frozen or other shelf-stable food for cost savings (18%), especially in lower-income and rural groups (nearly one in four).
• 37% say they are shopping for discounted items or using coupons.

Playing the channel game

• One in three consumers is shopping at multiple stores to cherry-pick the best deals, no longer staying for their complete shopping list. This behaviour, however, drops significantly for consumers who are single or earning over US$200,000 yearly.
• One in five have switched their primary grocery store to one that offers lower prices (but baby boomers are more loyal).
• 15% say they are reducing their online shopping to avoid paying related fees.

Taking more extreme steps

• Three in 10 consumers have stopped purchasing certain food items altogether—for instance, steak, high-end seafood, and even the little nice-to-have extras.
• 15% used assistance from a food pantry, Supplemental Nutrition Assistance Program (SNAP), Special Supplemental Nutrition Program for Women, Infants, and Children (WIC), or similar programs.

Food as medicine

When it comes to health, food matters. An unhealthy diet is the leading risk factor for death. A bad diet's role—in cardiovascular disease, type 2 diabetes, and even some forms of cancer—contributes to one in every five deaths globally.⁸ And there are other health conditions associated with food, including intolerance and allergies, nutritional deficiencies, and digestive health.

In the United States, over 48 million households have a member with a health condition that needs to be managed through diet. These households represent 60% of Americans and nearly US$270 billion in annual grocery sales, according to Nielsen data, in research published jointly by the Food Industry Association (FMI) and the Academy of Nutrition and Dietetics Foundation.⁹

Many households also face health equity challenges, with food insecurity itself strongly correlated with adverse health outcomes.¹⁰ Roughly 17 million Americans live in food deserts—low-income areas far from grocery stores.¹¹ They want healthy food but struggle to access it.

Food as medicine is a concept that recognises the preventative and therapeutic benefits gained through personalised, healthy diets based on scientifically validated claims. Broader definitions also include contributions to nutritional security and food safety.* But in no case should the concept detract from the importance of pharmaceuticals prescribed by a physician.

*Academy of Nutrition and Dietetics Foundation, “Definition of terms list,” February 2021.

While food producers and retailers have long made health a part of their strategy and messaging, helping consumers use fresh food as medicine may open new frontiers. Many consumers believe the right food can improve health and wellness (figure 4). At least three in four consumers think fresh foods have preventative or therapeutic benefits, or at times can be the best medicine. One in two consumers is willing to spend more on food that can act as medicine.

The number of consumers who believe there is a connection between food and health outcomes is one question. Another question is which specific benefits they seek out when buying food for its health and wellness properties (figure 5). General wellness, such as feeling good or having more energy, seems appealing to most people, which makes sense. But look beyond and find strong interest in several preventative and therapeutic outcomes associated with food as medicine.

Bridging a broken connection

Consumers hold fresh food in special reverence when it comes to health—80% believe fresh food is healthier for them than packaged or processed food marketed as healthy. But fresh food still has a disadvantage. Packaged health products can more easily make specific health claims on labels and can be formulated or supplemented to be geared toward the most desirable health outcomes.

Fresh food, on the other hand, has an information gap: 62% of consumers cite conflicting information and confusion about the healthfulness of specific foods. Four in 10 consumers do not clearly understand which fresh foods can act like medicine. A little over half of the consumers say it is essential to get data about food origins, safety, and nutritional properties to confidently use food as medicine.

But when a connection is made, good things can happen. Research into existing interventions, including Guiding Stars labeling and signage (used by brands like Hannaford, Giant, Food Lion, and Stop & Shop) and Kroger's OptUP program (see sidebar, “Innovative intervention”), demonstrate positive health outcomes.¹² Some studies also show that these programs can increase food sales for grocers^.13 Many retailers are starting to recognize the potential benefits to their top line. In a recent FMI study, seven in 10 retailers thought that consumer interest in leveraging food to manage or avoid health issues, which ties into the concept of food as medicine, will positively impact their businesses^.14

A role for data and technology

Companies that can help consumers close the information gap between fresh food and its health outcomes have an opportunity to win over consumers and compete on aspects other than price. For about half of consumers, a grocer-provided app could be an enabler (figure 6). These customers are willing to use an app and share their data as well as trust their grocer to provide personalised, food-based health recommendations. Four in 10 even indicate a willingness to share their medical data, which could spur a potential synergy with in-store pharmacies.

The consumers most willing to share their health and medical data are young to middle-aged and tend to live in more urban areas. Millennials and those willing to pay a premium for food as medicine are almost twice as likely to be ready to share, whereas older boomers are least likely. Interestingly, people who sometimes buy plant-based alternatives to animal products like meat are also almost twice as likely to fall in the willing-to-share-data group.

Fresh ideas for action

Inflation currently holds consumers' attention to the degree that it is hard for them to focus on much else besides price. While this situation lasts, companies should navigate associated purchasing behaviors carefully (for more details, see Appendix B: Inflation actions for the food industry).

But, even in the face of inflation, there appears to be an opportunity to benefit both consumers and businesses through health and wellness. Fresh food producers and retailers that can help consumers overcome the barriers and use food as medicine have the chance to increase their competitive position in fresh food and grow wallet share throughout the store. Those that choose this path may want to consider the following approach:

Prepare the way

• Establish a foundation for truth. Any health claims for food should be backed by science and properly stated. Build competence in scientific literature. Use RDNs and other medical professionals to vet and validate claims before connecting any benefit dots for consumers.
• Stock for health. Just like a store would stock products at different price points and good, better, and best quality, make sure you are providing options that serve customers’ health needs, including for specific groups such as diabetics, people with heart conditions, or those with food allergies.
• Form key partnerships. Health is an ecosystem, one that may still be unfamiliar. Consider partnering with organizations that can help provide context, come with resources, and fill critical gaps. For instance, insurers may be able to provide financial resources due to their built-in incentives for improved health. Others may be able to fill data gaps. Organisations, like Guiding Stars Licensing Company or Good Measures, have data maps between food products and nutritional properties that could speed time to market.

Deliver value

• Start at home. Consider building program elements to serve employees and people in the community who are fresh-food insecure. In addition to the inherent benefits of improving health, it is a way to establish initial partnerships and learn which interventions resonate and lead to healthier outcomes.
• Use technology. There is nothing quite as powerful as an RDN personally walking a customer through the aisles and educating them on healthy shopping and eating. But scaling that experience takes technology. The best apps can accommodate health profiles with data from multiple sources and keep nutrition guidance simple.¹⁸
• Build a smarter supply chain. Consumers want item-specific data to use food as medicine, which requires tracking and traceability. Food producers should provide detailed health and safety information in close partnership with retailers. Providing this data to customers in a food-as-medicine context is a possible way to get more value from investments undertaken to meet proposed new Food and Drug Administration traceability requirements^.19

Explore new frontiers

• Leverage in-store pharmacies. While initial efforts may need to rely on consumers completing profiles, establishing ways for customers to share their data from the pharmacy could provide much richer profiles to personalise recommendations. Understanding and complying with any legal, regulatory, or ethical requirements is, of course, essential.
• Think bigger picture. The health care industry itself is changing, with a deeper lens on health equity and emerging incentive structures meant to promote population health over procedures. It is not a giant leap to envision fresh food producers and grocers, with their trusted positions in their communities, joining forces with clinical providers and payors to serve people’s needs. There are already examples of these collaborations in practice. Other entities may enter the breach if the food industry fails to lead.

Appendix A: Revisiting fresh food consumer personas

Our 2020 study identified two distinct consumer personas based on responses relative to shopping frequency, amount of fresh food purchased, perceptions of price, channel usage, stress while shopping, and experience with stockouts. We found these distinct consumer personas, Contemporary and Conventional, emerging in 2022 like the previous two years.

Contemporary consumers make up 43% of the survey group, a 5-percentage point drop from last year’s survey. A return to more in-store shopping in a postpandemic scenario explains this drop. Contemporary consumers are mostly younger, more well-off, online shoppers, and urban dwellers. Conventional consumers, on the other hand, tend to be older, belong to low-income households, and are primarily rural.

As we examine health and wellness more closely in this survey edition, two critical aspects should be noted for grocers attempting to lean into this opportunity.

1. More Contemporary consumers (59%) than Conventional consumers (40%) are willing to share personal health information with their favorite grocers to seek personalised healthy food recommendations.
2. Contemporary consumers (56%) strongly believe they can derive healthful nutrition from fresh foods compared to processed foods and supplements. Only 44% of Conventional consumers feel this way.

Even the strongest proponents of fresh food are not immune to price colouring their preferences and behaviours. Seven in 10 Contemporary consumers are willing to pay a premium for fresh, but those willing to do so dropped 7 percentage points over last year. While shopping for fresh foods, brand name remains more critical for Contemporary consumers (55%) than Conventional (35%). The importance of brand name among Contemporary consumers fell from 71% in 2021 to 55% in 2022 (figure 7).

Meet consumers where they are

• Embrace those who need help. Make it easy and guilt-free for consumers to use food assistance benefits in stores, but especially online. More than one in 10 people in the United States are using SNAP benefits. Still, only a small fraction of the 250,000 retail locations that accept these benefits accept SNAP electronic benefit transfer payments online.²⁰ These consumers need the convenience of online ordering and delivery.
• Facilitate trade-downs. It is happening, so make it easier. Ideas include anticipating where consumers are moving and having that inventory on hand, using creative placement of products on shelves, and highlighting preferred alternatives in search results. This includes manufacturers creating lower-tier brand variants. Reengineer these products to focus on attributes that consumers care about most. Stripping away nonvalued features and ingredients can lower costs while improving relevancy in the consumers’ eyes.
• Grow private-label offerings. Trading down means there is an opportunity for retailers, and the manufacturers who serve them, in private label. Consumers are signaling they prefer to change from name brand to private label rather than switch form factors (such as buying canned food instead of fresh). When done correctly, those private-label offerings can focus on subsegments or specific groups of consumers who may begin to prefer those offerings to mass-branded national alternatives.

Collaborate for better outcomes

• Provide clarity on pricing. Keep costs down as much as possible, practice fair pricing, and when prices must be raised, make sure partners and consumers understand the reasons behind it. Transparency throughout the value chain helps others trust intent and could reduce suspicion of price gouging.
• Help consumers avoid waste. Consumers do not want to waste food, especially now. Anything that helps consumers eat what they buy before it goes bad will help. Help could come in several forms—appropriate package sizes, optimising cold chains to present food as fresh as possible, or even education about storage tricks and best-by dates. In some ways, this is about consumers managing risk. Freshness guarantees may provide reassurance.
• Insulate against abuse. Food manufacturers can work with retail partners to limit abusive shopper behaviors such as coupon stacking and other promotional manipulation. Some retailers are now using their customer data platforms and digital coupon systems to limit the audiences for digital coupons to those customers who either need them most or will respond best to them, without driving unprofitable consumer relationships. Retailers may discourage cherry-picking by not laying out all the sale items in one place, which makes grabbing sale items and moving to the next store easier. Consider using loyalty programs to provide incentives based on overall basket size to encourage filling entire shopping lists in one place.

Consulting Services for Consumer Products

The consumer products industry today faces virtually unprecedented challenges and opportunities. Eroding brand loyalty, increased merger and acquisition activity, enduring recessionary consumer attitudes and the rising influence of digital technologies on shopping behavior all threaten traditional business models–but also give rise to new and exciting ones. In the face of changing consumer needs and behaviors, Deloitte’s Consumer Products team is working with clients to strengthen analytics, improve internal operations and develop new market-facing capabilities and channels. With experience across a wide range of sectors–including food and beverage, personal and household goods, agribusiness, apparel and footwear, and household durables–we position our clients to lead in the face of change.