The situation: Even as grocery prices have normalized over the past year—prices were up just 1.1% YoY in October—58% of US households in November were “extremely concerned” about inflation, per 84.51°, a retail data company under The Kroger Co.

• The fact that nearly 3 in 5 US households continue to have inflation on their mind—despite it being at the second-lowest level in the past two years—is a clear sign that high prices continue to weigh on consumers at the grocery store and beyond.
• Consumers’ shopping patterns reflect those concerns. Sixty-nine percent of shoppers in November said that over the past year, they have been looking for sales, deals, and coupons more often (up from 64% in January), 54% are cutting back on nonessentials like snacks (up from 52% in January), and 45% said they were buying fewer items on their grocery trips (up from 39% in January).

Trading down: Nearly half (49%) of consumers are switching to lower-priced brands, including private labels, more often than they were a year ago—an increase from 47% in January.

• That trend hasn’t gone unnoticed as Kroger, Amazon, Target, and Albertsons have expanded their private label offerings to appeal to value-focused shoppers.
• Still, the shift isn’t evenly distributed across categories. While a significant share of consumers are far more willing to trade down in areas such as paper goods (62%) and shelf-stable products (59%), most are reluctant to do so when it comes to beauty (30%), pet food (25%), or baby care (21%).
• Only 30% of consumers are open to buying a cheaper pet food brand, a lower percentage compared with drinks (39%), personal care (40%), and beauty (41%).

Challenges ahead: While progress has been made in curbing grocery inflation, the policies of the incoming Trump administration have raised concern that prices could climb again.

• President-elect Donald Trump plans to impose 25% tariffs on all imports from Mexico and Canada on his first day in office in January. That will send the price of grocery-store staples such as avocados and maple syrup soaring. He has also threatened to levy 100% tariffs on members of BRICS, an informal consortium of countries including Brazil, which could drive up the cost of coffee and other products.
• He vowed in an interview on NBC’s “Meet the Press” to carry out mass deportations of people who are living in the US illegally. Undocumented workers account for at least 16% of the US food supply chain, per the Pew Research Center, which is why a Peterson Institute study estimates that policy could lead food prices to soar 10%.

Our take: The prospect of another wave of rising prices looms large for national brands, which are still recovering from the previous inflation surge.

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