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Exploring US Snacking Trends: Monitoring Inflation and Promotional Impact

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As Euromonitor International’s most recent Global Inflation Tracker reports, inflation is still very much a top priority for businesses and governments and is having a key impact on consumers’ real disposable incomes. In the US, inflation is expected to slow to 4.2% in 2023 from 8.0% in 2022, but with recession fears abound and rising interest rates, consumers are looking for help on spending anywhere they can find it. For many businesses, analysing top-line macroeconomic data is not enough to help support day-to-day pricing decisions and so it is important to look to online stock keeping units (SKU) data.

Sales of potato chips online in the US reached USD648.9 million in 2022  according to Euromonitor International’s e-commerce system, more than any other salty snack category, so this article looks at how prices and promotions have fared in this dynamic category at the start of the year (when snacking companies ferociously compete amid many sporting events such as the Superbowl) and what data manufacturers and retailers can look to for better pricing and promotional strategies.

Unit prices increase while promotional rates decline in grocery stores

US Snacking Trends Chart Labels.svgIn order to make decisions on pricing and promotions, companies need to examine the brands, categories and most importantly, the retail channels, that matter most to them and can impact their business. Narrowing one’s basket of goods can often be a more solid methodology for insights. For example, large marketplaces such as Amazon can feature a variety of large bulky items that do not reflect a typical family or consumer’s purchases and are not a good input to use for monitoring inflation rates. This sample only examines potato chip SKUs that are found in the 14 grocery retailers and mass merchandisers tracked in Euromonitor International’s e-commerce tracking tool Via.

As evident from the chart, both prices at the SKU level and the unit price for potato chips continued to rise through the first third of the year in 2023. While a rise in the SKU price of 5.2% indicates what consumers are seeing with regards to pricing changes, these rates can be more an indication of changes in pack sizes or product assortment. However, at the unit price level, potato chip SKUs rose 2.5% from January to April due to a number of inflationary factors as suppliers have reported rises in fertiliser costs due to the war in Ukraine, as well as cooking oil prices which have doubled since before the pandemic, in addition to overall transportation costs.

At the unit price level, potato chip SKUs rose 2.5% from January to April due to a number of inflationary factors

Source: Euromonitor International

Promotions are an important way for retailers and suppliers to help mitigate the impact of rising prices and standout amongst a variety of other options. For potato chips, promotional incidence, which is the number of SKUs on promotion compared to the total number of SKUs to purchase, was highest in January for this sample at 31% for the month. Consumers are extremely conscious of their budgets following the holiday season and it is clear how aggressively companies seek to capture attention, but as the year unfolds, it is evident that promotional incidence declines and grocery retailers struggle to maintain unit prices given such strong inflationary pressures.

Leading supermarket retailers aggressively promote products
US Snacking Trends Chart 2.svg

Promotional frequency at grocery retailers and mass merchandisers is an important strategy; too much promotion and consumers do not see any urgency or importance in changing their purchasing behaviour, while limited promotion can mean consumers do not feel any appreciation or support, and they might move on to different retailers and brands that offer more attractive discounts.

Monitoring and benchmarking are important strategies for companies in determining promotional frequency. Kroger, Publix and Safeway are the three leading supermarkets in the US by retail sales in 2022, and in this sample for potato chips, it is clear that all players were consistently higher than the 4-month average for promotional frequency, indicating how aggressive these companies are to retain consumers and communicate their support to them in combating inflation. However, strategies and frequency of promotions can provide competitive advantages; despite Kroger and Publix reducing the number of promotions in this space as the year unfolds, Safeway maintains high promotional incidence rates and even increases its promotions in April from March.

US Snacking Trends Chart 3.svg

Retailers have many options when it comes to promotions, such as how much of a discount to provide, but also the promotional language. Companies must select the right language consumers perceive as being more impactful to their budgets and purchasing decisions. The leading three supermarkets drastically differ in the promotional language used compared to the larger sample of grocery/mass merchandisers. For this basket of potato chips SKUs, Kroger, Publix and Safeway not only promote “save up to ($)” and “buy X SKUs for $Y” promotions more often, but also do not simply state “sale” with little added information compared to other retailers in the larger average, as they seek to generate more psychological triggers to create higher perceived value and urgency for the promotion.

Higher-priced brands have higher promotional incidence ratesUS Snacking Trends Chart 4.svg

Finally, while retailers and suppliers can track and monitor a variety of strategies for promotional and pricing changes at the category level, decisions need to be taken at the brand and SKU level so understanding differences at this level can shed light on promotional strategies. It is evident that more expensive brands, such as Kettle and Ruffles, have much higher promotional rates, indicating how competitive this space is and the need to balance value and discount when attracting consumers.

Meanwhile, private label SKUs, with the exception of those from Kroger, have low promotional incidence rates given the already reasonable price positioning of private label. While this is a narrow sample for a specific snack category in a specific retail channel, as companies navigate the complex landscape of inflation, finding the right balance of promotions and pricing by benchmarking competitors and SKUs provides data-driven decisions that can be tracked, evaluated and revised.

Read our article Global Inflation Tracker Q2 2023 for further analysis on the drivers of global inflation.

Note: Sample based on SKU prices found in Euromonitor International’s e-commerce tracking tool Via with data extracted in May 2023. Please note that due to ongoing improvements to the AI-led product matching of SKUs to categories, supplier, and brands, data and SKU counts can be revised based on system updates. SKU counts used for Potato Chips analysis: US (1,360) SKU information extracted from the following e-commerce retailers: Fresh Direct, Giant Eagle, Harris Teeter, H-E-B, Kmart, Kroger, Meijer, Pavilions, Publix, Safeway, Target, Walmart, Wegmans, Wholefoods

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