Slumping economy changing dairy buying habits

The slumping U.S. economy is changing dairy and food buying  habits of retailers seeking to reduce procurement costs and consumers seeking to reduce overall food spending, according to Dairy Profit Weekly Editor, Dave Natzke.

Reporting in his Friday DairyLine broadcast, Natzke said that, even though food price increases have slowed recently, the latest Consumer Price Index from the Bureau of Labor Statistics indicates 2008 food price inflation will be the highest in decades. Combined with concerns over personal income and wealth, those factors are changing the way consumers spend money on food, Natzke said.

Economists speaking on a recent Rabobank agricultural outlook webinar noted that, beginning in about 2003, U.S. consumers were willing to spend more on premium food items, both at home and when eating out in restaurants. However, beginning with the economic downturn in 2008, that’s changed 180 degrees.

The economists said spending on food eaten away from home, as a percentage of the total food budget, is at its lowest level since 1991.

“Consumers are turning away from mid to premium-priced restaurants and toward lower-priced restaurants, and lower-priced menu items,” Natzke said. The trend is similar for food eaten at home, as consumers are shopping at discounters, such as Wal-Mart, Kroger and Costco, and away from the traditional grocers. And, they’re seeking cheaper food items, such as lower quality cuts of beef and store-label products, in order to maximize food value for their money.  

The impact is going further, according to Dennis Erpelding, Elanco manager of government relations, public affairs and communications. Grocery store food buyers are looking for ways to reduce procurement costs, according to Erpelding.

“We’ve all heard of the move toward sustainability, when production and buying decisions are based on the three-legged stool of economics, environmental and social issues,” says Erpelding. “Food buyers are again putting more emphasis on cost and affordability to meet changing consumer demand.”