Inflation hasn’t stopped consumers from indulging in Toblerone chocolates and San Pellegrino water.
Mondelez, maker of snacks including Oreo cookies and Cadbury chocolates, announced yesterday that its revenue rose more than 7% for the first three months to March, compared to a year earlier. Last week, Nestlé, the world’s largest food maker, announced that its sales had increased by around 5% in the first three months of this year, compared to the previous year. Similarly, Starbucks recently recorded higher sales.
Why is that? Consumers turn to candy bars and snacks during an economic downturn to indulge when the world seems chaotic and cash is tight. Kool-Aid established itself as a brand during the Great Depression because it was an affordable, everyday luxury.
During the pandemic, American shoppers spent more on sweets — for example, triple chocolate cookies saw sales increase by more than 5,000% from 2019 to 2021 — according to data from Square, a financial services company. Higher food prices, which were 8.8% (pdf) more expensive in March compared to a year ago, have yet to deter consumers.
“In a time when money is getting really tight…having little indulgences, having little treats that are ‘necessary’ or convenient are also important because they make us feel that even when things are bad…we can have a little something festive thing,” Amy Bentley said. , a food historian at New York University.
Bentley says the financial gurus who advise increasing your savings by reducing your daily consumption of Starbucks, you can increase your savings, but miss out on the fact that a latte is a small way to treat yourself.
With the workday still operating as usual during the pandemic – remotely or otherwise – these items are stimulants that fuel us throughout the day, whether as a pick-me-up or to have a calming effect, he adds. she.
Additionally, being more stuck at home, consumers shifted to higher grocery spending since they weren’t venturing out to restaurants as much, said David Ortega, an associate professor at Michigan State University who focuses on food marketing and agribusiness management.
Americans are spending less of their budget on food than in the past
Mondelez, Nestle and Starbucks said further price increases are on the way. But, unlike rent or transportation, Americans are spending far less of their budget on food than in the past. Rather than cutting food, high prices are pushing consumers to shift discretionary spending such as dining out and travel, Mondelez CEO Dirk Van de Put said on a conference call with investors on Tuesday. and analysts.
Food also remains a non-negotiable necessity, and food companies often pass price increases on to consumers, primarily because they have significant market power, Ortega said.
Snacking is now more part of the meal
More broadly, snacking may be becoming a bigger part of the modern diet. “[T]he discretionary part of snacking is, I would argue, it’s not so discretionary anymore with modern consumers,” Van de Put said. He said that in China there has been a surge in snack biscuits because they have become a staple.
That said, price increases will be felt more by households with tighter budgets. How much can prices rise before consumers start cutting back on chocolate bars and sparkling water is an open question, especially as eating out becomes the norm again.