The Business of Thrift:Understanding Low-Income and Value-Oriented Consumers

A Hartman Group Study

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Methodology

QUALITATIVE RESEARCH QUANTITATIVE RESEARCH

• In-home ethnographic interviews

• Shop-and-talks

• Virtual interviews

• Homework

• Nationally representative survey

• Total: n=2352, ages 18-72

• Fielded online in August, 2018

Key Groups

• HHI <400% Federal Poverty Level

• Low socioeconomic status (household income less than $35,000 and high school education or less)

• P12M SNAP recipients

• Rural residents

• Value-oriented middle-class shoppers

Key Groups

• Low Income vs Mid/High Income

• Rural/Low-Density ZIP Code Augment

• Low Income defined as member of at least one of the following groups:

1. Past 12 months SNAP/WIC/EBT recipient2. Low socioeconomic status 3. HHI ≤400% Federal Poverty Level

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Defining “Low Income”

2018 Federal Poverty Level

HH Size100%Poverty

Threshold

150% 250% 400%

1 $12,140 $18,210 $30,350 $48,560

2 $16,460 $24,690 $41,150 $65,840

3 $20,780 $31,170 $51,950 $83,120

4 $25,100 $37,650 $62,750 $100,400

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How people spend money (on food) is a cultural phenomenon that informs individual actions and attitudes

Cultural values

Community

Housing Healthcare

Education

Food sources

Technological resources

Work

Spending and

budgeting styles

Purchasing and

eating behaviors

• What good food and good value entail

• Which needs are most important

• Values around the morality of spending behaviors

• Money, time, transport, access to information and support

• Physical and emotional capacity, storage availability

• Food availability

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Consumers with lower income make up a larger proportion of the population now than in decades past

16%

17%

18%

18%

20%

20%

9%

9%

9%

9%

9%

9%

61%

59%

56%

54%

51%

50%

10%

12%

12%

11%

12%

12%

4%

3%

5%

7%

8%

9%

1971

1981

1991

2001

2011

2015

Share of U.S. Adults in Income Tiers1

Lowest Lower middle Middle Upper middle Highest

10% 9%

62%

43%

29%

49%

1970 2014

Share of U.S. Aggregate Household

Income2

Lower Middle Upper

Income Distribution in the U.S.

1. Pew Research Center, 2015. “The American middle class is losing ground.” 2. Congressional Budget Office, cited by Lane Kenworthy, 2010. “The best inequality graph, updated,” (https://lanekenworthy.net/2010/07/20/the-best-inequality-graph-updated.)

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Low-income shoppers resemble others across many parameters

40% 44%

38% 37%

22% 19%

Mid/HighIncome

LowIncome

19% 24%

61%59%

20% 17%

Mid/HighIncome

LowIncome

Purchase decisions

Voting decisions

Involvementin local

community

Usually or always

Sometimes

Never or not very often

35% 32%

38% 41%

27% 27%

Mid/HighIncome

LowIncome

Liberal/very liberal

Moderate

Conservative/ very

conservative

Greatest Impact on Society

Frequency of Considering Sustainability/Social Issues

When Shopping

Political Orientation

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Definition of Health + Wellness

Income levels do not generally impact consumers’ definitions of Health + Wellness

69%

68%

62%

60%

59%

39%

39%

65%

62%

57%

57%

51%

50%

41%

36%

41%

28%

25%

57%

62%

59%

60%

55%

37%

42%

68%

60%

54%

59%

52%

48%

43%

39%

40%

29%

27%

Mid/High Income

Low Income

Leading a balanced lifestyle

Being physically fit

Having the energy for an active lifestyle

Not being ill

Not being overweight

Consuming natural, wholesome foods

Limiting or abstaining from alcohol, tobacco, or drugs

Feeling good about myself

Being able to deal with stress

Being alert and bright minded

Being happy and cheerful

Being able to enjoy time with my family

Being able to relax and have a good time

Maintaining a spiritual balance

Being confident about achieving my goals

Being on track financially

Being in tune with nature

Working to improve the environment or my community

92% | 91%Physical

91% | 91%Mental/

Emotional

69% | 69%External

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Most consumers, regardless of income, view cooking as both good for the wallet and good for the waistline, which casts home cooking as a morally upright habit.

Where low income consumers differ most from others is in their overall food usage and purchasing rather than their attitudes and aspirations around making food.

When it comes to home cooking, consumers across income levels generally enjoy it and feel they have the skills to do it well

62%

29%

50%

26%

53%49%

30%

58%

30%

50%

28%

49% 52%

28%

Mid/High Income Low Income

CookingTop 2 Box Describes Me

I enjoy cooking

I only cook because I have to

I am a good cook compared

to other people I know

I don't know how to cook very many

things

I make most of my own food

rather than buy it pre-made or from

restaurants

I would love to learn how

to cook more

I don't have time to cook as much as I would like

Attitudes Aptitude Approach Aspirations

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With more money, more than half of low-income consumers would buy more food – a key difference from mid/high-income shoppers

If You Had an Extra $100 per Week, How Would You Spend It?

Rank in Top 5

85%

69%

71%

39%

37%

81%

71%

61%

57%

31%Mid/High Income

Low Income

Savings

Debt or insurance

Travel/entertainment

Buy more/better food

Dining out

If I had a hundred more a month for groceries, I’d buy what I want instead of just the minimum.

I wouldn’t have to make a choice between bananas and oranges—I’d get them both.

–RM, Boomer, Female

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Financial limits likely feed into eating choices that are familiar and low risk, with low-income consumers prioritizing cost more and nutrition less

Weekly Food and Eating HabitsOnce a week or more

82%

74%

69%

65%

48%

49%

34%

41%

37%

30%

33%

31%

21%

17%

68%

68%

53%

41%

54%

45%

50%

26%

27%

33%

26%

31%

24%

14%

Mid/High Income

Low Income

Eat meals cooked at home from scratch

Eat familiar, comforting foods

Eat meals together with other people

Choose foods based on how nutritious they are

Eat whatever takes least time/effort to make

Eat purely for food enjoyment

Eat whatever is the least expensive

Eat out at restaurants

Order in or get takeout

Skip meals completely

Treat myself, family or kids with something fun or indulgent

Replace meals with snacks

Eat family dinners with the kids

Try new foods and drinks I've never had before

Inexpensive, filling, and easy to cook, pasta and rice are common staples in lower-income consumers’ pantries, but they present challenges to variety and nutrition.

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Grocery Channel Share of Grocery SpendingSelf-reported estimate

The lower a consumer’s income, the greater the share of their groceries that come from mass and dollar/discount

34%

25%

13%

8%

7%5%4%3%

25% 30% 33%41%

31%29% 26%

20%

21% 16% 15% 8%

6% 7% 8%10%

4% 5% 6% 9%

6% 6% 6% 4%3% 4% 4% 6%

Federal Poverty Level

<150% 150-250% 250-400% >400% Total

Other

Online Drug

Natural/Specialty

Club

Dollar/Discount

Mass

Grocery

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Top Grocery Retailers ShoppersPast 3 months

Low-income shoppers shop a much narrower range of stores that expands after about 250% FPL

Walmart

Target

Walgreens

CVS

Dollar Tree or Family Dollar

Amazon (inc. Fresh, Prime, PrimeNow)

Dollar General

Convenience store

Kroger (non-discount banners)

Costco

Sam's Club

Aldi

Trader Joe's

Albertsons Banners

Rite Aid

Whole Foods Market or 365

Publix

Vending machine

Ahold Banners

Save-A-Lot

76%

41%

39%

38%

37%

36%

33%

32%

31%

28%

23%

22%

19%

18%

17%

15%

14%

13%

12%

10%

Index to Total≤80 in red; ≥120 in green

Federal Poverty Level

<150%150-250%

250-400%

>400%

110 112 106 89

63 85 100 121

92 85 106 105

78 82 105 113

133 125 113 71

75 76 101 118

144 115 108 72

107 110 88 101

68 94 102 114

65 71 75 138

81 91 100 111

76 107 129 92

46 69 88 140

86 90 88 116

91 98 103 103

50 62 113 126

59 70 109 122

100 88 110 98

61 94 75 132

159 144 77 73

Average # Retailers Shopped 7.4 6.4 6.7 7.4 8.0

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As income decreases, shoppers become less likely to buy snacks, treats, and most fresh perimeter categories

Low-income shoppers tend to buy fewer categories overall, restricting their purchasing to “necessary” categories.

However, with just a little extra income –moving from <150% to 150-250% FPL –shoppers increase their purchasing significantly.

Average # of Categories Purchased

Total

Federal Poverty Level

<150% 150-250%

250-400%

>400%

Food 17.3 16.3 17.2 17.7 17.5

Beverages 8.0 7.0 7.5 8.1 8.6

Purchasing Patterns as Income Decreases (Past 3 Months)

Food Categories Purchased Beverage Categories Purchased

Less likely More likely Less likely More likely

• Pasta & cooking sauces• Snacks• Packaged breads• Frozen fruits/vegetables• Ice cream/novelties• Fresh produce• Fresh bakery items• Fresh meats/seafood• Refrig. alt. meat/cheese• Fresh dairy foods• Eggs• Deli/prepared foods

• Frozen pizza• Frozen

meat/meatproducts

• Beer, wine, spirits• Coffee (not canned/bottled)• Kombucha• Milk alternatives• Diet soda• High-protein beverages• Sparkling water• Enhanced water

• Regular soda

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Consumer definitions of value drive their purchasing; these definitions take into account consumer needs as well as cultural and personal values

Purchase MotivatorsConsumer-Defined Dimensions of Good Value

Experience Quality Price/Size Sustainability/Social

81% 75% 74% 43%• Tastes the best

• Pleases most people in HH

• Most filling to eat ordrink

• Saves time

• Easiest/most convenient to use

• Easiest of its kind to find/buy

• Freshest product

• Highest-quality ingredients

• Most nutritious/healthy

• Most natural/simplest ingredients

• Has certifications I’m looking for

• Lowest price per ounce/unit

• Can use it fully without waste/just the right size

• The largest possible amount at a given price

• The least expensive of its kind

• Made by a company I trust

• Most environmentally friendly product

• Benefits local businesses or economies

• Made by a company that shares my values

• Made by a company that treats its employees well

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Low-income shoppers are often less able to take advantage of sales/promotions than higher income shoppers

Sales, Deals, and PromotionsPast 30 Days Strategies Used

They’ll have chicken sometimes for buy one, get one free at BI-LO. I just get one and that’s a week’s worth of chicken for $6–$7.

I know that there you don’t actually have to buy two to get the discount. Other stores aren’t like that.

–RM, Boomer, Female

75%

65%

58%

50%

32%

30%

74%

67%

51%

42%

43%

25% Mid/High Income

Low Income

Specials

Lowest Possible Price

Coupons

Loyalty Cards/Points

Cheaper/Generic Brand Swap

Buying in Bulk

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While less likely to use sales/promotions, low income consumers are more likely than others to reduce their overall food usage and purchasing

Food and Beverage Usage and PurchasingPast 30 Days Strategies Used

With the food bank, you don’t always know what is going to be there, so it can be hard to plan—you can get pasta but not sauce, for example. The one in the U District is super nice, and my daughter likes going there, because it’s like a mini-grocery store. The other one that is closer to us makes you feel like you’re part of a herd.

–SN, Gen X, Female, SNAP Recipient

63%

59%

42%

22%

3%

17%

74%

63%

46%

33%

11%

7% Mid/High Income

Low Income

Reducing unnecessary purchases

Making own food

Reduce waste

Reduce food usage

Using food banks or food pantries

None of the above

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42%

24%

34% 33% 32%

23%

40%36%

26% 26% 26%21%

Mid/High Income Low Income

Big, national brands

Conventional store brands

National organic/

natural brands

Store brands from natural

grocery stores

Natural/ organic

store brands from

conventional grocery

Newer, small brands

Low-income shoppers are more likely to prefer conventional private label brands compared to mid/high income shoppers

Brand PerceptionsI like it MORE than other types of brands

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• Low-income consumers represent a large and diverse population, with a wide-ranging set of needs

• However, they share many similar aspirations with regard to food and share the same wellness beliefs and goals as higher income consumers

• Limitations on food purchasing reach well into the middle classes

• Federal standards classify over half of U.S. consumers as “low income,” which means that the population of consumers who weigh food and beverage against other necessary expenses is likely much larger than typically thought

• Low risk food choice are preferable as low income consumers lack the resources to hunt for deals all over town or experiment with new retailers

• Low-income and value-oriented shoppers are often already buying the lowest-priced item – typically generic or store brands – and therefore have less use for coupons, loyalty points, or bulk buying

• Affordable solutions for fresh food is an enormous opportunity area

• Meat, produce and dairy are often the most expensive items in their baskets; they spoil quickly and often require cooking, making them a risky purchase

• Consider smaller pack sizes, extended shelf lives, mix and match pricing, fresh as an incremental component of packaged food, etc.

Key Findings

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ABOUT THE HARTMAN GROUP

The Hartman Group is the premier food and beverage consultancy in the world. Companies and brands across all segments of the food and beverage industry benefit from our unparalleled depth of knowledge on consumers, culture, trends and demand-side market strategy. We listen closely to understand our clients’ business challenges and tailor solutions that deliver transformative results. Through a unique suite of integrated custom, primary research capabilities, market analytics, and business strategy services, we uncover opportunity spaces and avenues for growth. We deliver more compelling insights that fuel inspiration and ideas for innovation.

3150 Richards Road, Ste. 200 Bellevue, WA 98005Tel (425) 452 0818 Fax (425) 452 9092www.hartman-group.com

Thank you!

For more information about the this report, please contact me at:

laurie@Hartman-group.com

Ph: 425-452-0818, ext. 106