After enhanced unemployment benefits ended last month, consumers reined in their grocery spending on most categories, except for beverage alcohol, according to a report from market research firm IRI.
“Most categories have seen deceleration in growth, with prepared meals, meat and cookies showing the most impact, while milk, bread and beverage alcohol are minimally affected,” IRI reported.
In late March, the federal government began providing unemployed workers an additional $600 each week on top of the unemployment benefits from their respective states. However, those enhanced benefits ended at the end of July.
On August 8, President Donald Trump issued an executive memorandum that would grant an additional $300 weekly to unemployed workers, but this benefit would only be available in a handful of states.
Between the weeks ending July 26 — the last full week of incremental $600 payments — and August 9, consumer spending on almost all edible goods dropped 5 or 6 points on IRI’s Edible Dollar Demand Index. The only exception was beverage alcohol, which remained flat. The index tracks dollar sales in the beverage, frozen, general food and refrigerated departments at multi-outlet retail stores, including grocery, drug, mass merchant, club, dollar and military channels.
Within beverage alcohol, volume sales of wine have remained flat between the weeks ending July 26 and August 9. Volume sales of beer and cider have gained 1 point on IRI’s Edible Volume Demand Index, the only segment to do so.
Volume sales of beer have declined 15 points from their highest reading of 125 during what IRI called the “peak stockpile” period (the four weeks ending March 22), and have remained mostly flat since then.
Grocery segments with the biggest declines following the cut to unemployment benefits include frozen dinners (-9), cookies (-9), soup (-7), refrigerated juices and drinks (-7), refrigerated meat (-7), coffee (-7) and breakfast meats (-7).
“As recessionary behaviors take hold, retailers will want to sharpen their price-value messaging, highlight their opening price point products and adapt their end-of-the-month assortment and pricing strategies,” IRI wrote.
Brands should “consider bringing back targeted price promotions,” the firm continued.
The end of enhanced unemployment benefits does not appear to have affected on-premise dining, though consumers are returning to restaurants slowly. Restaurants reported a 5% increase in seated diners between the weeks ending July 26 and August 9, although these weeks declined -61% and -56%, respectively, compared to the same weeks in 2019. Since states began allowing on-premise establishments to reopen in mid-June, restaurants have reported declines hovering around 60% compared to 2019.
Consumer spending in the convenience channel has also been largely unaffected by the end of enhanced unemployment benefits. IRI’s edible demand index for the c-store channel has been flat since mid-July.