Price Sensitivity Crimps Grocery Spending in Europe

Elevated food inflation is forcing more European consumers to walk away from certain grocery purchases, with French and German adults among the most inclined to trim spending
January 18, 2024 at 9:40 am UTC

Key Takeaways

  • While headline inflation is cooling in Europe, food price growth remains elevated. 

  • Morning Consult’s Price Sensitivity Indexes for groceries in France, Germany, Italy and Spain have registered a strong upward trend along with price growth, consistent with monthly spending data showing consumers are cutting back on food purchases amid higher costs.

  • In late 2023, French and German households cut grocery budgets more than Spanish and Italian adults, whose faster real income growth helped support their purchasing power.

Eurozone Inflation Has Cooled, With Price Growth in Spain and Italy Farthest Below 2022 Peaks

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Source: National statistical agencies/Haver, Morning Consult

Inflation has been cooling in Europe over the past year amid easing supply constraints and elevated interest rates. However, the cost of food remains high after rapidly climbing over the past two years in the wake of Russia’s invasion of Ukraine in early 2022. Persistently high grocery costs have been spurring sticker shock among European consumers, according to Morning Consult’s proprietary data tracking consumers’ response to prices, leading more households to walk away from grocery purchases.

Elevated Food Costs Coincide With Higher Price Sensitivity, Lower Spending

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Source: National statistical agencies/Haver, Morning Consult

From January 2022 to December 2023, food prices have increased substantially across Europe, with total price growth over this time period ranging from 18% in Italy to 24% in Germany. Despite decelerating inflation over the past year, elevated price levels throughout 2023 coincided with rising price sensitivity for groceries, according to Morning Consult’s proprietary index tracking the prevalence of consumers walking away from purchases due to prices. Germany, where food prices climbed the most over the past two years, had the largest net increase in price sensitivity since tracking began in July, with a net increase of 27 points. Italy, where food prices climbed the least, had the smallest increase (12 points) among the four Eurozone economies tracked. 

Europeans’ increased price consciousness around food purchases also shows up in Morning Consult’s consumer spending data. Real spending on groceries declined since July 2022 in all four countries tracked - with the largest decline once again occurring in Germany (10.6%) and a relatively smaller decline in Italy (3.6%). While certain food purchases are staple items that cannot be cut from budgets, consumers are eliminating nonessential items from grocery baskets to reduce the cost burden from elevated prices. 

Spanish food purchases appear relatively less pinched by prices compared with French, German and Italian consumer

Morning Consult’s Substitutability Index for groceries tracks consumers’ relative inclination to trade down to cheaper alternatives. In France, Germany and Italy, consumers over this time period also showed increasing willingness to trade down on groceries, while Spaniards reported slightly less inclination to buy cheaper alternatives. Price sensitivity and trading down often go hand in hand, as both represent cost-cutting strategies to cope with rising inflation. However, they are not always correlated, depending on consumer preferences for one strategy over the other or limits to feasibility. For example, if consumers have already eliminated all non-essential grocery purchases from lists, walking away from further purchases might not be possible - but trading down to cheaper alternatives remains an option to cut down costs. Conversely, if consumers are already buying the cheapest version available for most food purchases, they won’t necessarily be able to find cost-saving substitutes to swap in. 

Trading Down Has Been Rising Across the Eurozone - Except in Spain

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Source: Morning Consult Economic Intelligence

Consumers in Southern Economies looking less bothered than Germans, French

In Spain, however, lower trading down appears to be a symptom of relatively less financial strain from prices compared to the other European geographies. Inflation peaked earliest in Spain and fell below 2% by mid-2023, helping to strengthen consumers’ purchasing power. Morning Consult’s data showed average reported real monthly incomes were 14.7% higher in November 2023 than in the same month a year ago - the largest jump among the four Eurozone countries tracked. 

Incomes in Spain, Italy Catching Up to French and German Peers

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Source: Morning Consult Economic Intelligence

As Spanish consumers feel their financial situations improve, they have less need to be frugal. Not only were Spanish adults the only group putting less effort into trading down on food purchases, but their Price Sensitivity scores for groceries peaked earlier than other countries and remained relatively flat throughout 2023. Furthermore, while real spending on groceries remains below its early 2022 level, the decline was smaller in Spain than in other countries, and monthly spending amounts have been recovering through November 2023. 

A similar story may start to play out in Italy: While purchasing power has been repressed by relatively higher inflation in Italy, that dynamic recently shifted as price growth slowed at the end of 2023. Meanwhile, Italians reported the second strongest jump in real incomes in the year ended November 2023. The combination of rising incomes along with softer inflation at the topline and for food items specifically could boost grocery spending in Italy going forward. 

However, Eurozone food spending overall may continue to be held back by persistent price sensitivity in its two largest markets: France and Germany. Consumers in these countries are reporting relatively weaker real income growth amid a more gradual inflation cooldown. These factors suggest spending growth for groceries may remain limited by French and German consumers’ ongoing inclination to trade down on or eliminate non-essential food items. 

A headshot photograph of Kayla Bruun
Kayla Bruun
Senior Economist

Kayla Bruun is a senior economist at decision intelligence company Morning Consult, where she analyzes consumer spending, inflation and household finance trends, leveraging the company’s proprietary high-frequency data.

Prior to joining Morning Consult, Kayla was a key member of the corporate strategy team at telecommunications company SES, where she produced market intelligence and industry analysis of mobility markets. 

Kayla also served as an economist at IHS Markit, where she covered global services industries, provided price forecasts, produced written analyses and served as a subject-matter expert on client-facing consulting projects. 

Kayla earned a bachelor’s degree in economics from Emory University and an MBA with a certificate in nonmarket strategy from Georgetown University’s McDonough School of Business.

Follow her on Twitter @KaylaBruun. For speaking opportunities and booking requests, please email [email protected]

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