The new era of food cost control: how data makes the difference

Rising food costs are reshaping the food and beverage landscape, putting immense pressure on both consumers and businesses.

F&B companies face the double challenge of staying ahead of consumer trends while managing escalating costs. Failing to adapt quickly enough could mean falling behind competitors, misreading consumer preferences, or making costly decisions based on outdated or incomplete data.

The difference between success and failure lies in data-driven decision-making. Teams that rely on real-time, actionable insights can proactively navigate these challenges—identifying shifts in consumer behavior, optimizing product offerings, and ensuring competitiveness, even as prices soar.

Understanding food cost control in 2024

Food prices are soaring worldwide, and it’s a trend that shows no signs of slowing down. In 2023 alone, the average U.S. shopping basket cost rose by 9%, reaching over $210. 

The FAO Food Price Index also reported a 3% month-on-month increase in September 2024, the largest since March 2022. These rising costs put immense pressure on food and beverage brands, challenging them to maintain profitability without losing their already thinly stretched consumers.

What consumers are paying for basic food items

Food inflation is hitting consumers where it hurts most: their grocery bills. The USDA food pricing figures highlight the substantial impact of inflation on essential food items, affecting consumers’ grocery bills significantly over the recent months and have showed the following:

Product	Increase
Eggs	Prices have risen by 54% since November 2020, reflecting ongoing supply chain issues and increased production costs
Dairy Products	This category, including milk, cheese, and butter, has seen an increase of around 36%.
Cereals and Bakery	Prices for items such as bread and cereals have risen by approximately 28%.
Meat and Poultry	Collectively, these have increased by about 23.5%, with specific rises in chicken prices exceeding 25%.
Fresh Fruits and Vegetables	This category has recorded an average price increase of around 21%.

These price hikes are more than just numbers. They signal to CPG brands and foodservice providers that consumer buying habits are shifting. As the cost of essential food items continues to rise, consumers are forced to seek out more affordable alternatives, creating both challenges and opportunities for businesses. 

Brands using real-time data to anticipate these shifts— through dynamic pricing strategies or offering budget-friendly alternatives— are better positioned to maintain consumer loyalty and profitability in a tightening market.

The impact of rising grocery prices

As prices climb, consumer behavior responds. Many have turned to private labels, bulk buying, and seeking out discounted items to cope. According to CNBC, private label sales rose significantly in 2023 as shoppers tried to stretch their budgets further. Bulk retailers like Sam’s Club and Costco reported a 26.6% increase in sales as consumers sought more value for their money.

What choices are consumers making to control spiraling food costs?

The rapid rise in food costs has led to drastic changes in consumer shopping habits, as people look for ways to keep their grocery bills manageable —opting for private labels, bulk buying, and more affordable staples. These shifts in behavior are driving significant changes in food trends, with some products gaining traction as cost-effective alternatives while others see declining sales due to their higher price points.

Switching to private labels and bulk buying

Private labels, or store brands, are increasingly popular as consumers seek cheaper alternatives to name brands. In 2023, private label goods saw a 19% year-over-year sales increase. Bulk buying is another major trend, with more shoppers heading to stores like Costco to purchase pantry staples in larger quantities to save money.

Favoring frozen and canned goods over fresh

Fresh fruits and vegetables are becoming a luxury for many. As their prices continue to climb, consumers are shifting to more affordable frozen and canned options. These alternatives offer longer shelf life and cost savings, with sales of canned goods rising significantly in 2023.

Dining out less, cooking at home more

Restaurants are also feeling the pinch. Fast-food chains and premium dining experiences have seen a dip in foot traffic as consumers opt for home-cooked meals instead. With groceries costing less than eating out, families are increasingly choosing to prepare meals at home, a trend that brands can leverage by promoting cost-effective home-cooking products. 

According to the FMI report “Finding Growth for Food & Beverage Retail: Winning Eating Occasions,” retail has the opportunity to win back the home-prepared evening meal by offering convenient solutions like ready-to-cook, ready-to-heat, or ready-to-eat items. Providing consumers with the right tools and education to make meal prep easier is key to capitalizing on this shift.

Products gaining traction as affordable options

Store brands, canned and frozen goods, and bulk items are clear winners in this affordability-driven environment. Meal kits are also gaining popularity as they offer convenience and cost savings compared to dining out. Products that provide versatility, such as rice, pasta, and beans, are seeing higher demand as they remain relatively affordable.

Products losing sales due to high costs

On the flip side, premium and luxury food items are experiencing a decline in sales. High-cost items like certain meats and dairy products are becoming less accessible to budget-conscious consumers. Restaurants, particularly fast-food chains, have also seen declines in sales due to price sensitivity.

Food cost control with data

Brands can no longer rely on traditional methods to control food costs. Instead, they need real-time data insights to stay ahead of the curve. Here’s how data can make a difference.

Using data to analyze consumer spending patterns

Data platforms like Tastewise offer dynamic tools to track real-time consumer spending patterns. These insights help brands understand where consumers are directing their dollars and how to adjust their offerings accordingly. 

According to How Affordability Shapes Food Choices Gen AI survey, over 72% of respondents are switching to cheaper alternatives due to rising food costs. Seasonal discounts are the most popular promotions, preferred 3.1 times more than referrals, showing brands the importance of well-timed offers.

The survey also highlights that 71.43% of consumers associate higher costs with organic or healthy products, signaling an opportunity for affordable health-conscious alternatives. Bulk buying is another key trend, with 60% opting to buy in bulk or during sales to manage costs.

Despite price concerns, 70.76% of consumers still value innovation over price, especially for products offering health benefits, indicating that innovative, health-focused products remain a priority.

By leveraging these insights, brands can optimize their strategies to align with evolving consumer preferences.

Identifying cost-effective alternatives for consumers

Amid rising food costs, brands need to offer budget-conscious consumers viable alternatives without compromising on quality or nutrition. Here are some wallet-friendly ingredient swaps that allow consumers to enjoy flavorful meals at lower costs while opening new growth opportunities for food brands.

Expensive Ingredient	Average Price	Affordable Alternative	Average Price	Why It Works
Quinoa	$12.89	Brown Rice	$13.51	Both are gluten-free with similar nutritional value, offering protein and fiber.
Fresh Vegetables	$11.56	Frozen Vegetables	$7.17	Frozen options provide the same nutrition at a lower cost and longer shelf life.
Boneless, Skinless Chicken Breasts	$13.51	Whole Chicken	$10.09	Whole chicken is versatile, offering multiple cuts and can be used for broth.
Saffron	$15.00	Turmeric + Paprika	$8.99	This combo provides a similar color and flavor depth at a fraction of the price.
Ground Beef	$11.78	Ground Turkey	$10.40	Turkey is a leaner, less expensive substitute with a milder flavor that absorbs spices well.
Almonds or Cashews	$9.02	Pumpkin or Sunflower Seeds	$6.39	Seeds offer similar crunch and nutritional benefits at a lower price.
Filet Mignon	$35.30	Chuck Roast or Pork Shoulder	$15.95/ $8.06	Slow-cooking cheaper cuts can replicate the tenderness of pricier meats.
Fresh Berries	$8.07	Frozen Berries	$4.34	Frozen berries are cost-effective and available year-round, great for smoothies and baking.
Vanilla Beans	$4.05	Vanilla Extract	$4.71	Extract provides a similar flavor for baking at a much lower cost.
Truffles	$17.60	Porcini Mushrooms or Truffle Oil	$8.06/$18.00	These alternatives mimic the earthy, rich flavor of truffles without the steep price.

These ingredient swaps are affordable and allow brands to innovate with lower-cost products that resonate with today’s price-conscious consumer. By tapping into these alternatives, businesses can deliver high-quality, cost-effective options that meet consumer needs and strengthen brand loyalty.

Recipe for cost-efficient consumer products

Data-driven recipe generation can highlight affordable alternatives for consumers. For example, using AI to create recipes like “Slow Cooked Chuck Roast“ or “Turkey Avocado Lettuce Wraps” can help brands offer budget-friendly meal ideas without sacrificing taste or nutrition. These recipes attract cost-conscious consumers and provide new growth avenues for brands.

Creating cost-efficient products doesn’t have to mean compromising on quality. Utilizing tools like Tastewise’s AI-powered innovation and development solutions, brands can create products and recipes that meet both consumer demand and budget constraints. For example, the rise of organ meat- and offal-based dishes, as outlined in the Tastewise 2024 trend report, has subsequently seen a 4.74% increase in social discussion since that report’s release last year according to Tastewise data.

 Additionally, 3.46% of restaurants now offer offal-based dishes on their menus, with American cuisine leading the way, and “mini” being the fastest-rising consumer need. 

The price of innovation: how affordability shapes food choices

It’s very simple. People will buy what they can afford. With food costs increasing, the demand for low-cost alternatives will rise. F&B stakeholders need to rise with it. 

With the right insights, businesses can take advantage of emerging consumer trends – whether it be the growing demand for meal kits or selling more cost-efficient ingredients, and can still maintain profitability – and rapidly execute effective marketing and development actions at speed and scale. 

By harnessing the power of Tastewise’s real-time data platform, F&B brands can gain a competitive edge, which enables them to:

• Adjust their pricing
• Monitor spending patterns, and 
• Develop products that meet consumers’ evolving needs without breaking the bank.

Consumer data allows for greater personalization and more precise target marketing. If you are confident in what your consumer wants, you can innovate with lower risk. Tastewise empowers brands with the insights they need to thrive in this challenging environment.

FAQs

How can companies adapt to consumer spending trends?

Companies can adapt by using real-time consumer insights to anticipate shifts in spending patterns and adjust their product offerings accordingly. Tools like Tastewise provide actionable data that allow for swift adaptation to changing market conditions.

What trends are shaping consumer behavior in response to rising costs?

Key trends include a shift toward private labels, increased bulk buying, and a preference for frozen and canned goods. Consumers are also cooking more at home and dining out less.

How can companies use data to adjust pricing strategies?

By leveraging platforms like Tastewise, companies can use dynamic pricing analysis and real-time eRetail data to optimize pricing strategies. This allows brands to remain competitive while managing rising costs effectively.