Why Your Grocery Bill Still Hurts

Grocery prices have surged significantly since the onset of the COVID-19 pandemic, both in the United States and abroad. Food consumed at home — everything from bread and meat to fruit and dairy — rose by an average of 21.7% between February 2020 and fall 2024, according to an analysis by University of Michigan economist Don Grimes, who specializes in consumer trends.

The impact of inflation wasn’t confined to grocery stores. Dining out became even more expensive, with prices at sit-down restaurants, fast-casual chains, and fast-food outlets increasing by 28.5% during the same period. Meanwhile, wages struggled to keep up. The average weekly compensation for private-sector workers rose just 24.2% in four years, and many workers reported receiving minimal or no raises at all.

By contrast, the price of alcoholic beverages rose at a slower pace. Drinks consumed at home increased by 11.1%, while those served in bars and restaurants were up 20.8%. “So people cannot afford to eat, but they can afford to get sloshed, at least at home,” Grimes commented wryly.

The steady rise in food prices has not only strained household budgets but also left a lasting mark on consumer sentiment. This frustration has spilled over into unrelated areas. For instance, when Transportation Secretary Pete Buttigieg celebrated a smooth Thanksgiving travel season, social media users derailed the conversation with complaints about food prices, including the infamous “But the price of eggs!”

Higher food costs remain a top concern for consumers, business owners, and analysts alike. As we approach 2025, questions loom about whether relief is on the horizon.

Price hikes continue

Food price trends for 2025 present a complex picture. On the one hand, some retailers — like Walmart, Target, Amazon Fresh, and Costco — have advertised price cuts. However, these reductions often exclude essential food items. Bureau of Labor Statistics data from October 2024 show year-over-year price drops in categories like white bread, sirloin steak, bacon, chicken, and iceberg lettuce. Andrew Sharpee — a partner and managing director at New York-based AlixPartners, a management consulting firm specializing in U.S. and global business — highlighted the importance of these drops, noting, “It’s the first month where we’ve really seen prices go down year-over-year.”

However, this progress is overshadowed by significant price hikes in other areas. Egg prices skyrocketed 62.6% between October 2023 and October 2024. Similarly, orange juice and long-grain rice saw double-digit increases, while items like spaghetti, processed cheese, and milk experienced smaller but still noticeable price bumps.

Food recalls and financial pressures are additional challenges 

Compounding the issue are food recalls due to bacterial contamination. In November 2024, Costco recalled more than 10,500 containers of eggs due to contamination concerns. Around the same time, the FDA issued alerts for Mexican-grown cucumbers and carrots, citing salmonella and E. coli risks, respectively.

These disruptions come at a time when consumers are already feeling the pinch. Beyond food, rising mortgage rates, high rents, and persistent gas prices (averaging $3 per gallon in many areas) are straining budgets. “The economy is doing fairly well, but consumers are feeling financial concerns,” Sharpee explained.

Some of the pain depends on where consumers live, too. The national average for a month’s worth of groceries is $354.50, according to calculations by the World Population Review. Residents of Hawaii, Vermont, Alaska, New York, and West Virginia pay the most per month for groceries, while they are the least expensive in New Hampshire, Kansas, Idaho, Utah, and Arkansas. 

The USDA’s 2025 forecast: limited relief

The USDA predicts food prices will rise by an average of 2.5% in 2025. While this rate is historically low, it follows several years of sharp increases, leaving consumers weary. Grocery prices are expected to rise by 1.6%, but the range — anywhere from a 3.7% drop to a 7.4% increase — adds uncertainty.

Even modest price hikes may trigger frustration among shoppers already burdened by four years of price escalation.

Strategies to coax consumers back

Retailers are trying to regain consumer confidence. Some have reintroduced coupons, both in-store and online, as a way to attract cost-conscious shoppers. Amazon, for example, offers discounts at checkout, while Etsy offers Cyber Monday deals on pantry staples like nuts and maple syrup.

However, these efforts may not go far enough. Grimes notes that during the pandemic, many consumers switched to organic food to improve their health. Now, faced with tighter budgets, these shoppers may need to make additional sacrifices to maintain those choices. “They must cut back even more on other purchases to afford the food they want,” he said.

Another factor is that consumers who were stuck at home for several years are now eager to travel, and that means making sacrifices or, for some, going into travel debt. “They have to re-allocate where they spend their dollars from a food and beverage standpoint to afford those trips,” Sharpee says. 

A survey of 2,000 consumers by Engage3, a market analysis firm, revealed a variety of tactics for fending off higher prices. Some 41% of consumers say they now stock up during sales, while 37% say they buy less or have switched to cheaper brands. Another 34% said they are using deals or coupons.

Sharpee believes it will take lower food prices and higher personal incomes to rebuild consumer confidence. While inflation has fallen to its lowest level in three years, persistent price increases in key food categories dampen the perception of economic recovery. As Sharpee put it, “They have to allow the consumer to feel they have dollars to spend.”