As the pace of inflation has slowed in recent months, grocery shoppers are cautiously optimistic about their finances heading into the New Year, even as they express continued worry about food prices. Food retailers can take heart that pandemic-era shopper preferences around preparing and eating meals at home remains strong, and shoppers are increasingly looking to their grocers’ fresh food service departments for the value they provide in their home and holiday meal preparation.

Despite the uncertainty that shoppers and retailers have faced in the last few years, it’s important to keep in mind that even with inflationary increases and short-term price fluctuations, the real cost of groceries in America as a share of household income has remained remarkably consistent over the past 20 years.

It is no secret that the food supply chain has recently faced significant challenges. Extreme weather events; fuel price volatility; raw material shortages; transportation and labor challenges; and global disruptions caused by the COVID-19 pandemic and global conflict have impacted the supply chain at virtually every touchpoint.

Yet despite the historic inflation those issues helped create, the economy has started to recalibrate. Whereas shoppers faced an average increase of 11.42% in grocery store prices in 2022, the year-over-year increase this September was just 2.4%. Furthermore, the USDA’s Economic Research Service (ERS) Food Price Outlook for 2023 revised its food-at-home inflation forecast down to an anticipated average of 4.9% for the year, and there are indicators that grocery prices could end the year even lower, offering what will hopefully be a welcome reprieve for grocery shoppers, many of whom are concerned about having enough money to pay for food.

Encouragingly, shoppers are more optimistic about the future. FMI’s 2023 Holiday Grocery Shopping Trends survey found that 35% of shoppers are optimistic their household finances will be better in 2024, and shoppers say they plan to celebrate the holidays largely the same as they did last year.

This is positive news for grocers, especially given that the majority of shoppers are taking steps to address rising food prices this holiday season. Nearly half of shoppers say they are looking to cook more meals at home. This gives retailers the opportunity to highlight the value and convenience their food service departments can provide, whether it be providing freshly made sides to compliment a home-cooked meal or providing time-strapped shoppers with the option of purchasing their entire holiday meal at a more affordable price than dining out or ordering takeout.

Additionally, 41% of shoppers say they are saving money by buying different or more affordable products, while 30% say they are trying different brands, signaling a rise in private brand offerings.

FMI’s Power of Private Brands research found that 60% of shoppers are buying more private brands this year, and 90% plan to continue buying store brands once inflation normalizes. By offering deals and promotions on private brand products and cross-merchandising strategies with national brands this holiday season, while shoppers are especially open to seeking value and trying new products, food retailers can boost product and brand loyalty that is likely to persist even as inflation eases.

And while overall inflation the past few years has been significant, it is important to examine this challenging economic period through a broader, more historic lens. At FMI – The Food Industry Association, we recently analyzed inflation over the last 20 years and found that grocery store price inflation has remained incredibly consistent, ranging between 1% and 4% per year. In fact, food inflation has remained on par with other major spending categories from 2003 to 2023 while falling below the inflation rate of things like medical care and other goods and services.

Yet perhaps the most revealing data from our analysis is that contrary to recent media coverage on the price of food, Americans are spending less of their income on groceries now than they did in 2001. In that year, the average household spent 6.92% of its take-home pay on groceries. Using the latest data available from the Bureau of Labor Statistics, American households spent 6.68% of their income on groceries in 2021.

This reduction in the price of groceries as a percentage of take-home pay is even more pronounced when we look at low-income shoppers, who spent 27% of their income on groceries in 2001 compared to 22% in 2021.

Certainly, the increases in food prices of the past two years have posed challenges for consumers. But it is important to recognize that despite this rocky patch, historical trends continue to show that cooking and eating at home is and has been one of the best deals American shoppers can find.

While there is still work to be done to tame inflation, there is reason for optimism for both shoppers and retailers as inflationary price increases continue to slow. And while economic concerns and more cautious consumer spending may result in a slightly more subdued holiday meals season than usual this year, there are still ample opportunities for retailers to provide value to consumers via fresh food service departments and private brands as they look for ways to save on their holiday celebrations this year.

Leslie Sarasin is the president and chief executive officer of FMI – The Food Industry Association, which works with and on behalf of the entire industry to advance a safer, healthier and more efficient consumer food supply chain.