How Inflation Impacts Retail: Catalina Shopping Basket Index Tracks Q1 Price Hikes in U.S. and Europe

Prices for several common food and personal care items topped the overall rate of inflation in the U.S. and Europe, according to the Catalina Shopping Basket Index. Tapping into its rich, real-time Shopper Intelligence Platform, Catalina looked at the aggregate price increase of 10 common product categories in the U.S., U.K., Italy, France, and Germany in Q1 of 2023 compared to the same period in 2022.

“A number of factors are driving up prices in Europe and the U.S., including the war in Ukraine, lingering supply chain disruptions, and rising aluminum, energy, ingredient, and labor costs,” said Sean Murphy, Chief Data & Analytics Officer at Catalina. “In response, we’re seeing CPG marketers and retailers place more emphasis on promotions and price incentives and working more closely with them to earn the loyalty of value-conscious shoppers with highly personalized offers.”

Murphy pointed to the most recent Grocery Quarterly report by the Cleveland Research Company, which stated: “Best-in-class suppliers are working with grocers to develop a promotional strategy which avoids encouraging consumers to ‘cherry-pick’ deals while still messaging value to consumers.”

Double-Digit Price Hikes Across U.S. and Europe

On average, yogurt prices rose the most in Q1 of 2023, up 18%, closely followed by Frozen Food (+17%) and Frozen Vegetables (+16%). The biggest individual country price jumps posted were for cereal in the U.S., up 21% from a year ago, and Deodorant in Germany, which rose 27%.

Q1 Inflation Rate Trends Higher In Certain Categories

The Catalina Shopping Basket Index shows prices for these 10 common grocery items was at least twice the inflation rate for food at home reported by their respective governments. For all countries surveyed, food prices rose on average 1% from Q3 2022, but are now stabilizing in Italy (+6%), France, and Germany, both +5%. U.K. food prices have continued to rise to 7%, with the U.S. dropping slightly from 7.4% in Q4 2022 to 7.2% in Q1 2023.

U.S. Inflation Rate for Groceries Slows in Q1

Inflation is hitting shopping baskets unevenly in the U.S. Cereal and yogurt had the biggest jumps, both up 21% from a year ago. But the rate of inflation is slowing across categories, when compared with Q3 2022. All categories fluctuated no more than two percentage points, an indicator that inflation continues to slow in the U.S. But the Catalina Shopping Basket Index, which averages +16%, is higher than the Consumer Price Index’s +7% Q1 inflation rate for food at home.

U.K. Grocery Prices Average The Highest Across Categories

The U.K. is experiencing the highest inflation rate in Europe. The Catalina Shopping Basket Index shows prices rose 19% on average from a year ago for the 10 common categories. Yogurt prices rose 23% from Q1 2022, followed by Frozen Vegetables (+19%), Frozen Food, (+17%), Paper Products and Soaps & Detergents, which both posted a +15% increase. Only the Coffee and Deodorant categories are on pace with the U.K.’s Office of National Statistics +7% rate of inflation for Q1 2023. Hand & Bath Soaps trend lower at +5%.

France, Germany & Italy

The Q1 inflation rates are fairly consistent across France (+14%), Germany (+13%), and Italy (+12%), according to the Catalina Shopping Basket Index. Outliers in France and Germany include Frozen Food, both +19%, and Paper Products, both +18%. Soft Drinks in Germany are a relative bargain, with prices rising only +6% from a year ago, as is the cost of Deodorant in France, at +5%.

Strategies For Marketers in Inflationary Times

“With the worldwide increase in inflation starting back in mid-2021, our insights about traditionally price-sensitive and value-seeking shoppers apply to even more consumers now. We continue to advise our customers that these challenging economic times are an opportunity for brands to fine-tune their omni-channel approach to deliver relevant offers and valuable incentives to help shoppers make the most of their dollars,” said Murphy. Among the strategies Catalina espouses that are designed to combat inflation:

• To drive sales lift and build loyalty, build omni-channel campaigns that include multiple digital channels and in-store point-of-sale.
• Maximize every dollar by developing targeted shopper cohorts, built from fine-tuned audience segments.
• Use a real-time feedback loop to measure and continuously adjust campaign performance to stretch marketing budgets farther.

To learn how Catalina’s proprietary shopper intelligence insights can help your brand, reach out to us.