With stimulus checks on hold, Americans are spending less at the grocery store

End to extra unemployment benefits among reasons for recent dip in food spending

Grocery shoppers are cutting back on spending, data show, a sign that Americans are hurting for cash as the federal unemployment stimulus remains on hold for most recipients.

The emerging shift in food spending comes after the $600 in weekly additional unemployment checks expired in July. It has also prompted grocery stores to bring back something customers haven’t seen much of during the pandemic: discounts.


Lump-sum stimulus checks consumers received in the spring and the extra unemployment money for people who lost their jobs in the pandemic have helped shore up consumer businesses amid widespread shutdowns and millions of workers claiming unemployment.

While consumer spending rebounded between May and July following a plunge earlier in the spring, analysts say that a broader pullback on grocery spending could mean lower sales for more discretionary items such as clothes and cars.

Walmart Inc. executives said consumers are nervous about their finances and job security in the absence of stimulus aid, leading to cutbacks in spending.

“People perceive they’re spending more money on food, despite eating out less,” said Walmart U.S. Chief Executive John Furner on a conference call last week. “So we’ll be thoughtful about the way we plan the rest of the year and react to changes in the trends we see from our shoppers.”


Other retailers, such as Stop & Shop Supermarket LLC, also expect consumer spending growth to be tempered in the months ahead by economic uncertainty and the continued disruption of sporting events, restaurant dining and other facets of pre-pandemic life.

Gordon Reid, president of Stop & Shop, a grocery chain owned by Koninklijke Ahold Delhaize NV, said he expects prices to be a challenge for consumers in the last quarter of the year and into next year. While Reid hasn’t seen a direct connection to reduced unemployment checks, he said customers have become more price-conscious.

President Trump signed an executive order earlier this month that would provide recipients with an extra $400 a week, but the program has run into delays as it requires states to reconfigure their unemployment systems and chip in $100 per person. So far, three states are distributing funds.


While sales of groceries, such as frozen dinners, cereal, soup and coffee, are still higher than they were a year ago, sales growth has slowed compared with July and prior months in the pandemic.

Sales growth of frozen dinners, for instance, averaged about 9% for the three weeks ended Aug. 16, compared with around 17% for the previous two weeks, according to the IRI CPG Demand Index. Cereal sales, meanwhile, averaged a 2% increase the three weeks ended Aug. 16, compared with about 6% average growth the prior two weeks, the IRI data show.

The data includes online and in-store sales at traditional grocers, dollar stores, mass retailers including Walmart, and club stores. It doesn’t include convenience stores.

Grocery prices were broadly consistent with prior weeks, and restaurant dining held steady during that time, the IRI analysis showed, indicating that neither was a significant factor in the slowed grocery spending—further evidence that the halted unemployment stimulus was a driving factor.

Some states with higher unemployment, such as Illinois, Nevada, and New York, recorded a greater deceleration in grocery spending, according to IRI.

Fewer trips to grocery stores, along with smaller receipts per visit, are typical patterns during a recession. As consumers gravitate toward value, food companies and retailers say they’re preparing to offer discounts that can eat into margins and intensify competition.

Sales at the grocery store have been rare since March, but grocers are now bringing those back, selling low-price items in bulk and revamping loyalty programs they say are aimed at helping customers save money. Retailers and their suppliers are also selling more value packs.


Stop & Shop said its sales growth started slowing to single digits in early June compared with double-digits at the start of the pandemic. The Quincy, Mass.-based grocer recently launched initiatives such as three-day sales and a new loyalty program that allows consumers to spend points on groceries and fuel. The grocer’s advertisements of discounts, which went down to four pages from the usual 10 pages at the start of the pandemic, are now eight pages long, Reid said.

Associated Food Stores, a cooperative of more than 400 grocers, is now promoting more items and offering discounted products in bulk largely for large families, said chief financial officer Bob Obray.

“There is anxiety out there” because of economic uncertainty, he said.

Midwest grocer B&R Stores Inc. started highlighting under-$1 items in its advertisements as shoppers become more budget-focused, said President Mark Griffin, though the chain hasn’t seen a change in sales growth.

The financial stress could lead to more people shopping at dollar stores, as middle-income consumers who wouldn’t normally shop there might start to, according to Morgan Stanley retail analyst Simeon Gutman.

More insight into consumers’ spending behavior will likely come on Thursday, when discount retailers Dollar Tree Inc. and Dollar General Corp. are scheduled to report earnings.

Some consumers have already started buying groceries at cheaper retailers. Jennifer Dickerson, a 36-year-old marketing manager, started buying groceries at her local Trader Joe’s in Studio City, Calif., and stopped shopping at CostcoTarget Corp. and Kroger Co. ’s Ralphs chain. Dickerson, who has two toddlers, also price-checks everything else online so her family can save more.

“We feel like we have to be prepared for anything,” said Dickerson.

Mary Proffitt, 63, who was laid off by her restaurant employer in Kentucky at the end of March, hasn’t received stimulus or unemployment checks since May because of a backlog in her state. She said she cut weekly spending on groceries by half to $100, and relies on canned and frozen vegetables. “I’ve never been this destitute before,” she said.

Newly price-sensitive shoppers are buying more store-branded items, said Mike Duffy, chief executive of C&S Wholesale Grocers Inc., a distributor to grocery chains including Safeway and Southeastern Grocers. Private-label brand sales are outpacing national brand sales, he added.

The trend could start putting pressure on grocery suppliers, including packaged-food companies. Cereal maker Kellogg Co. and Kraft Heinz, which owns Oscar Mayer and other food brands, said they are planning to bring back discounts aimed at budget-conscious shoppers as they try to hold on to sales momentum they have gained in recent months.

J.M. Smucker Co. is one of the companies that says it is holding back on deals. Chief Executive Mark Smucker said Tuesday he hasn’t seen an impact from the halted unemployment bonus on its brands, and demand remains too high to merit discounts on its jams, Folgers coffee and some other brands. “We are keeping an eye on the competition and taking it week by week,” he said.