July 24, 2019

$351 billion spent annually on food

If you have trouble finding what you need in a grocery store, it could be because the typical supermarket sells 25,855 different items.

Food is definitely a big business. According to the Food Marketing Institute, Americans spend $351 billion a year for food in 147,000 grocery stores.

But despite the heavy spending for groceries, the long-term trend has shown consumers spending a decreasing percentage of disposable income on food. In the late 1940s, the typical family spent more than 20 percent of its disposable income on food to be consumed at home. By the late 1980s, that declined to slightly less than 10 percent.

Meanwhile, since the 1930s the average family has spent about 5 percent of disposable income on food consumed outside of the home, or in restaurants and fast-food outlets. While the restaurant industry has grown rapidly, the increases apparently have come from increasing incomes and not from families spending a larger percentage of their incomes in restaurants.

Farmers receive about 24 cents of every dollar spent on food. This includes farm products that are distributed through grocery stores, restaurants, fast-food outlets, hotels and institutions.

But the 24 cents represents an average and the farm share varies a lot, depending on the commodity. For example, egg producers receive about 65 cents of each retail dollar spent on eggs because little processing or handling is required.

Bakery products, however, require extensive processing and the result is that wheat farmers receive as little as 8 cents from each dollar spent on bread.

After farmers get their 24 cents of the retail food dollar, the remaining 76 cents go for labor, assembly, processing, transportation and distribution, or handling charges beyond the farm. Non-farm labor and food packaging costs are the major components of this processing bill.

According to the Food Marketing Institute, although farmers get a relatively small share of the retail food dollar, the main cause of changes in food prices is price changes at the farm level. Farm prices can change rapidly, and depend on factors like the weather and international market changes. Prices for services provided in the food-processing and distribution sectors are more stable.

Surveys conducted by the Food Marketing Institute indicate that 96 percent of all shoppers consider nutrition to be an important factor when making their choices in grocery stores. Only taste, which was important to 97 percent of the shoppers, scored higher.

The main concerns about the nutritional value of food are related to cholesterol, fat and salt.

Supermarkets rely on volume sales for their profits. After-tax profits are running at about 0.86 percent of sales. In other words, profits at supermarkets amount to less than 1 cent for every dollar spent.

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