Consumers cut spending as inflation & tariffs hit groceries

Consumers around the globe are changing their grocery shopping habits and overall spending choices as financial pressures, ongoing inflation and tariff uncertainty continue to shape household budgets.

The results of a new Blue Yonder survey, which canvassed more than 6,000 consumers in Australia and New Zealand (ANZ), France, Germany, the Middle East, the United Kingdom, and the United States, found widespread concern around inflation's impact on grocery prices, with 85% of respondents reporting unease over rising costs at checkout.

Causes of inflation

According to the survey, nearly half (49%) of all participants believe newly introduced global tariffs are the primary factor behind higher grocery prices. Other significant contributors cited include increased costs for raw materials (42%), higher labour costs in manufacturing and food processing (39%), and higher profit margins for brands and manufacturers (33%).

The view of what is driving inflation differs across regions. Fifty percent of ANZ consumers view increased profit margins for brands and manufacturers as the leading cause of inflation, while consumers in the United States (65%), United Kingdom (56%), and Middle East (50%) mostly point to global tariffs. In France (48%) and Germany (47%), rising raw materials costs are seen as the principal factor.

The survey also found a generational divide in perception. Baby Boomers are more likely to attribute grocery inflation to increased manufacturing and processing labour costs (52%), whereas other age groups indicate global tariffs as the primary cause.

"The findings of this survey underscore just how widespread and deeply felt the impact of inflation is on consumers' everyday lives," said Ben Wynkoop, Senior Director, Global Industry Strategist, Grocery & Convenience, Blue Yonder. "From buying fewer grocery items and cutting back on alcohol purchases to shopping at discount retailers and reprioritising spending across other categories, consumers are navigating prolonged uncertainty — and retailers must adapt accordingly."

Wynkoop added, "In today's global market, tariffs are significantly impacting grocery supply chains, resulting in inventory and logistics challenges, as well as increased costs for both retailers and consumers. Leveraging advanced technology for AI- and ML-driven scenario planning and visibility across the end-to-end supply chain can help grocers mitigate tariff-related disruptions by increasing agility, resilience and cost savings."

Shopping behaviour shifts

Amid these inflationary conditions, consumers are significantly adjusting their purchasing habits. Sixty-five percent of those surveyed said they would buy fewer grocery items as prices rise. Forty-two percent indicated they would turn to discount and wholesale retailers, and about a third said they would shop more for promotions and discounts (36%) or switch to private label brands (34%).

Alcohol is the grocery category facing the largest reduction, with 33% of respondents planning to cut back on alcohol purchases in response to grocery inflation.

"During times of economic uncertainty, consumers often look for ways to save money on essential items such as groceries, from shopping at discount stores to seeking out sales and opting for private label brands," said Wynkoop. "As a result, retailers tend to prioritize and invest more heavily in their owned brands to accommodate these changing shopping behaviours. Sophisticated retailers are becoming more vertically integrated from production to consumer to maintain greater control over their supply chain, increase profitability and deliver more affordable products to shoppers."

Cutbacks beyond groceries

The survey found high grocery costs are influencing cutbacks on other discretionary retail categories. More than half (56%) of respondents said they are willing to reduce spending on clothing and footwear, making it the top category for cutbacks globally. Other notable areas where consumers are curbing spending include consumer electronics (46%), streaming and gaming subscriptions (43%), personal care and beauty (36%), appliances (33%) and automotive purchases (28%). Only 7% of respondents reported that they were unwilling to reduce expenditure on other retail items to offset higher grocery costs.

Regionally, consumers in ANZ were most likely to reduce spending on clothing and footwear (67%), followed by the US (62%), UK (61%), France (49%), Germany (49%) and the Middle East (47%). The next most affected category varied by nation. ANZ (60%) and UK (54%) respondents cited streaming and gaming subscriptions, while Germany (42%), the Middle East (40%) and France (39%) mentioned consumer electronics. For US consumers, subscriptions and consumer electronics were equally likely to be cut, both at 54%.

Generationally, Baby Boomers led in willingness to reduce spending on clothing and footwear (63%), compared to Gen X (59%), Gen Z (53%) and Millennials (50%).

"With most consumers willing to adjust shopping habits in response to grocery inflation and mounting financial pressures, retailers – not just grocers – need to recognize the importance of building trust with shoppers through transparency, targeted promotions and affordability-first strategies," Wynkoop added. "Having the right supply chain solutions can help retailers win with consumers during times of both economic prosperity and difficulty."

The Blue Yonder 2025 Global Consumer Sentiment on Grocery Inflation Survey was conducted by a third-party provider, offering insights from over 6,000 consumers about their reactions to ongoing grocery price inflation and what they believe to be the causes behind these price trends.