Food spending grows slowly

Food expenditures rose 2.3 percent in 1992 to $601 billion, with food at home up 1.3 percent and food away from home rising 3.5 percent. This growth was lower than for any other major category of personal consumption expenditures, as is typical.

With the Nation gradually climbing out of recession in 1992 and with very small price increases for food at home, food expenditures adjusted for inflation rose 0.7 percent (0.1 percent at home and 1.5 percent away from home)--less than population growth. In other words, food spending per person at constant prices declined 0.4 percent in 1992.

Price rises were modest--the smallest in 25 years due to ample supplies, and were much less than for most other products and services. Vigorous competition among sellers of food--both for use at home and away--helped restrain price increases.

Recession Dampened Spending, Especially at Restaurants

In keeping with the typical recession trend, real food spending per person declined in 1991--but less than in typical recession years. A decline was found in each recession since 1953, except the brief one of December 1969-November 1970. In 1981, for example, real food expenditures per capita declined 1.0 percent after having increased every year since the bottom of the preceding recession in 1974. In 1991 and 1992, however, real food expenditures per person were down marginally, reflecting the milder recession.

Table 1
Food Spending Rose 2 Percent in 1992

         Expenditures           1970    1980    1990    1991    1992
Change,
  1991-92

                                       Billion dollars
Percent

All food and beverages(1)       139.1   356.0   645.2   669.3   687.2    +2.1

All food (excluding alcohol)    117.1   306.0   566.6   587.5   600.9    +2.3

At-home food                     77.5   185.6   311.3   324.2   328.4    +1.3
Sales                            73.4   177.4   302.7   315.3   319.4    +1.3
Home production and donations     4.1     8.3     8.7     8.9     9.0    +1.1

Away-from-home
meals                            39.6   120.3   255.2   263.3   272.6    +3.5
Sales                            33.8   103.1   225.3   232.4   240.4    +3.4
Supplied and donated(2)           5.8    17.2    29.9    30.9    32.2    +4.4

Alcoholic beverages              22.0    50.0    83.0    85.7    86.3     +.8
Packaged                         12.9    29.4    48.6    50.2    51.6    +2.8
Drinks                            9.1    20.7    34.4    35.5    34.7    -2.1

Notes: 1 These include all food and alcoholic beverages, regardless of who
paid for them. Data may not total due to rounding. 2 Includes child-nutrition
subsidies.

TABULAR DATA OMITTED

Government's share in total food expenditures rose in 1991 and 1992, as it typically does during a recession when more people are unemployed and receive food stamps. The share of food paid for by Federal, State, and local governments increased from 5.0 percent in 1989 to 5.7 percent in 1991 and 6.2 percent in 1992.

One of the ways by which people economized during the recession was to cut down on eating out. Despite the long-term trend to more eating out, the share of dollars spent away from home declined in 1990 and again in 1991 before it began to recover in 1992.

Competition Among Sellers of Food Sharpened

Recession-squeezed consumers shopped around for bargains to stretch their food dollars. That paid off through lower spending--and heightened competition for business.

Where consumers buy their food and other groceries has changed drastically in the 1980's and early 1990's. Supermarkets' share peaked in the mid-1980's at almost 65 percent of the sales of food for home use. The remainder comes from other smaller grocery stores, specialty food stores, and a wide variety of other outlets.

In addition, the formats of supermarkets have been rearranged sharply. Total sales (including non-food) of conventional supermarkets dropped from 73 percent of all supermarket sales in 1980 to 48 percent in 1986 and 30.5 percent in 1991. Superstores and combination food/drug stores increased their share from 22 percent in 1980 to 36 percent in 1986 and 51 percent in 1991. Shares for other formats, which emphasize lower prices (such as warehouse, superware-house, and limited assortment stores), increased from 5 percent in 1980 to 16 percent in 1986 and 18 percent in 1991.

More competitors have come on the scene in recent years, strongly emphasizing low prices. The new competitors increased their combined sales of food to consumers from 1.7 percent in 1982 to 4.9 percent in 1992.

Warehouse clubs (formerly called wholesale clubs) are hybrids of membership wholesale clubs and retail stores. They carry a wide assortment of general merchandise, groceries in large packs, and perishables, such as meat and some produce. More than 40 percent of their food sales are to operators of small restaurants, institutions, and noncommercial groups, such as churches and clubs. Their share of food sales to consumers has increased from almost nothing in 1982 to 1.5 percent in 1992.

Some mass merchandisers, also called discount department stores, have included a supermarket since the early 1960's, when a number of supermarket chains entered the business. Many such chains left the discount business in the 1970's as the field became crowded. More recently, some--notably Wal-Mart and KMart--have opened very large hypermarkets and super-stores (which include a large supermarket). Mass merchandisers' share of food sales to consumers rose from 1.1 percent in 1982 to 2.1 percent in 1992.

The most recent entrant has been super-discount drugstores, which sell dry groceries (no perishables) at a discount. The share of all drugstores (not just deep-discount stores) increased from 0.6 percent of food sales to consumers in 1982 to 1.3 percent in 1992.

Operators of all kinds of supermarkets feel the hot breath of competition as these newcomers invade their markets. Many supermarkets are fighting back by featuring bulk sales and large club packs at competitive prices.

Alden Manchester The author is senior economist with the Commodity Economics Division, Economic Research Service, USDA.

COPYRIGHT 1993 U.S. Department of Agriculture
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