The Food Economy Shift

Following the financial collapse of 2008, many Americans, who found themselves jobless with continually dwindling savings, shifted their spending habits from frivolous to frugal. And even those low- to middle-income Americans who remained employed were holding their wallets a little closer for fear of losing gainful employment. This economic uncertainty caused a measurable shift in consumer spending, dissuading American families from dining out or even purchasing luxury items at the grocery store, as buying basic necessities and gasoline now trumped lavish restaurant meals and extravagant shopping adventures.

Small businesses soon took a hit as well. If increased competition and a weak economy weren’t detrimental enough to the small business owner, businesses now contended with decreased consumer spending. For example, consumers opted to brew more coffee at home rather than indulging in the $3 cup of coffee per day, and if they were to venture to their local coffee shop or restaurant, they are spending much less per visit—truly a testament of choosing survival over satisfaction.

“As the economy goes down, consumers have less income and have to spend increasing amounts on high gasoline prices,” says Stephen S. Nicholson, Chief Economist at International Food Products. “People are redirecting money to different places and aren’t spending extra money to go to restaurants; instead they stay home and eat food bought from the grocery store.”

However, grocery stores are feeling the heat as well. The Bureau of Labor Statistic’s consumer price index shows the price index for grocery store foods has risen 3.7 percent since December 2010, due in part to the rise in costs to grow, transport and process food as the result of higher energy prices.

Before the meltdown, low-cost retail stores experienced an influx of consumer spending. Now, while consumers may choose giant retailers on a more frequent basis, they are spending fewer dollars with each trip—families have less disposable income because of higher unemployment rates or under-employment attributable to decreased wages or less frequent bonuses.

Behind the scenes, various other facets of the food economy feel the strain of the waning economy, from manufacturing to transportation of goods to the ever-increasing cost of energy. While gasoline prices continue to rise, food prices will follow, offsetting other gains in the economic recovery.