High food prices are driving consumers away from big brands

Consumers are driving a shift in the food industry by resisting steep price increases. Starbucks saw a 7% drop in US traffic last quarter, and fast-food joints Wendy’s and McDonald’s face declining sales.

Contributing factors
Experts say sharp price increases implemented by food companies in the aftermath of the COVID-19 pandemic resulted in US consumers spending the highest portion of their income on food in three decades.

Fast-food prices in March soared by 33% while groceries climbed 26% compared to pre-pandemic levels, says the Labor Department.

Consequently, US fast-food traffic dipped by 3.5% in the first quarter, and grocery sales declined by 2% in volume compared to 2023, according to Revenue Management Solutions and NielsenIQ.

In response, companies are recalibrating their strategies. McDonald’s and Starbucks plan to roll out more promotions and communicate them clearly.

Snack makers Kraft Heinz and Mondelez International are adjusting pricing and introducing smaller pack sizes to entice price-conscious consumers. 

But, some brands like Domino’s Pizza are holding firm on prices to maintain customer loyalty.