With rising prices, consumers have been trying to find ways to save, whether it's by shopping at low discount grocery stores or eating out less. Emily Moquin, a food and beverage analyst at Morning Consult, joined Cheddar News to discuss the grocery chain Kroger's earnings, how it benefited from the shift in food habits, and the broad outlook for consumer grocery spending.

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Kroger Benefits as Consumers Change Habits to Eat Out at Restaurants Less

here to discuss more. Emily McQuinn food and beverage analyst for decision intelligence company Morning consult Kroger saw sales top expectations. The company is raising its full year guidance as we mentioned. So what's your take on Kroger's results here? Yeah, I think this is something that is a reflection of the changing shopping patterns we're seeing, we have been asking consumers if they're making changes to the way that they eat and drink as a result of inflation. And one of the top things that people say they're changing is eating out at restaurants less. So clearly that's sort of in Kroger's favor in the favor of other players in the grocery category. I'm glad that you mentioned some of consumer habits. But how have these shopping habits really changed for discount chains? Since the last quarter we've been checking in with consumers regularly on, you know how those shopping patterns are changing and of course in this category it's extremely concerning to see the prices continue to go up for consumers so they are making adjustments and thinking about your point which retailer is going to get their dollars. And sometimes that means shifting to a discount retailer. Sometimes it means purchasing fewer groceries overall. Sometimes it means purchasing different brands or products, especially store brands or generic private label brands to save dollars. And I think we'll continue to see, you know, those sort of shifts happening for consumer shopping patterns? Yeah, definitely an inflation is at the wholesale level and shows food prices climbing 1% higher in july, that's the fastest increase in four months. Do you think there's concern that rising prices could cut into the profits of grocery store chains like Kroger and walmart? And I will point out walmart being one of those situations where they did do their best to not pass on some of these inflationary changes to their consumers, instead offloading them on suppliers. In many cases it's a tricky line to walk for retailers, you know, they want to keep those shoppers coming to their store as opposed to one of their competitors. And one of the ways to do that is potentially to keep those costs low. Um but at the same time they are then, you know, potentially taking a hit in terms of the increased input costs that they're dealing with. So it's a really tricky balance to try to figure out, you know, the prices that will keep consumers coming through the door, but then also making sure that they're hitting the profit that they need to and profits are notoriously tight in this sector, In grocery in general, it's um you know, high frequency of purchases but relatively low margins and low dollar ring. So it is tough to balance that for retailers. It's also an interesting time, especially because we know consumer habits aren't fast and steady across all industries is one of the biggest seasons we've seen for revenge travel. So people are willing to spend money, they're willing to splurge, sometimes going for dining out instead of shopping in the grocery store for their food needs. Do you anticipate the prices will be coming down in the next few months because of a number of any of these factors or just the fact that maybe people will start to pull back when it comes to their budgets, you know the decrease in demand could certainly help to bring those prices down a bit. Um I think the manufacturers in this category are still dealing with a lot of volatility and their input costs, whether that is through increased ingredients, packaging, gas, labor, you know, there's so many factors in the supply chain here that are impacting their costs and some of that is still trickling through the supply chain in the system. So I think we'd all like to see looking forward to that C. P. I next week to see, you know at least less of an increase month over month in this sector in particular, it's the second highest category for most consumers in terms of what they spend their money on right after housing. So, you know, any any decrease there would be very welcome. Absolutely, Emily. Before we let you go anyways, that shoppers can offset the rising cost of groceries right now. You know, I always think about being sort of plan fel in terms of your shopping trip, making sure that you're thinking about the foods that you need for each meal and snack of the day so that what you're buying is getting used, You're not buying extra items that either will go to waste or you know, you didn't need to spend money on maybe this week. It could have waited till next week. So some of that advanced planning, it's not something that everyone likes to do, but I think it goes a long way in terms of making sure that you're getting those essential items in the cart and that you're using up all those groceries. Such good advice, a such good advice. That's Emily, McQuinn food and beverage analyst at morning consult.