BofA Finds Increasing Number Of Wealthier Americans Now Shop At Value Supermarkets

US consumers, the biggest economic force in the world, are rapidly altering their spending habits and where they get groceries due to persistently high inflation, 19 months of negative real wage growth, and threats of recession. 

Bank of America’s report on consumer trends titled “Supermarket Swap” found consumers are “trading down” (i.e., shifting spending from more to less expensive items within the same category), with yearly growth spending at value grocery stores up more than a third versus premium stores. 

According to the findings of the report:

So who is “trading down” the most? Middle – and higher-income consumers have more scope to trade down and shift spending to less expensive versions of items, since lower-income consumers are more likely to be shopping at less expensive grocery stores already. For the higher-income consumers , spending at value-tier grocery stores in October 2022 was up 22% relative to January 2019, according to Bank of America data, likely due to persistent negative real wage growth this year

BofA reminds readers of the latest Consumer Price Index (CPI) print via the Bureau of Labor Statistics, which shows prices for the ‘food at home’ category were still at a shocking 12.4% YoY in October. They said, “real (inflation-adjusted) grocery spending per household, estimated using Bank of America card data and CPI inflation, has slowed substantially since 2021 and was below 2019 levels in October,” but the number of transactions per household made at the grocery store was still holding levels in line with 2019, indicating “real grocery spending per household per transaction that has dropped meaningfully.” 

This means the consumer is trading down for cheaper items at the supermarket. BofA data shows consumer spending at value-tier supermarkets exploded earlier this year as inflation surged, “suggesting an increasing rotation into cheaper grocery options. This adds further evidence that consumers might have been looking for alternative ways to save on groceries by trading down and purchasing from less expensive stores,” the report said. 

And why are consumers shifting to value-tier supermarkets? One big issue has been 19 months of negative real wage growth. Essentially the vast majority of Americans find their cost of living is increasing faster than the income they bring home.

BofA said middle- and higher-income consumers are more likely to be the ones trading down since lower-income folks are already shopping at value-tier stores. 

The report focused on annual incomes of $50k – $100k and >$100k and found significant shifts in spending as value-tier supermarkets surged in popularity among wealthier Americans. 

And now, people in higher income brackets are trading down for cheaper items and shopping at value supermarket stores.