Low-income households are a growing consumer group — the percentage of American adults within the low-income tier rose from 16% in 1971 to 20% in 2015. Some government programs define low-income households as those making at or below 400% of the poverty level, stretching into what the general public considers the middle class and accounting for a much larger portion of U.S. consumers.
To find out how shopping practices vary between low-income and mid- to high-income households, the Hartman Group surveyed over 2,300 individuals ranging from 18 to 72 years of age. Roughly 80% of those surveyed were low-income consumers (up to 400% of the poverty threshold), and the remaining 20% were mid/high-income consumers. The Hartman Group also conducted interviews and accompanied low-income and thrifty middle-class consumers on shopping trips to better understand the “why” behind their food and beverage choices. They presented the results in the 2018 report, The Business of Thrift.
Many low-income individuals have similar social and political views as higher classes and comparable perspectives on health and wellness, eating, and cooking. But because of barriers like financial constraints, food access, and limited transportation, they often have to prioritize low cost and convenience over their beliefs. They are less likely to eat meals with others, eat out at restaurants, or order in. Those activities are generally considered “treats.”
If given an extra $100 a week, 57% of low-income consumers in the Hartman Group’s study said they would spend it on food. (Only 39% of mid- and high-income participants answered this way.) Low-income buyers often feel that they have to make difficult choices when it comes to food, and this slight budget increase would allow them to go a little beyond the basic necessities.
What they buy and where they buy it
Low-income consumers shop from fewer food and beverage categories, sometimes avoiding whole store sections because those items are outside their price point. Buyers in the lowest income sector are less likely to purchase items like snacks, fresh foods, coffee, and ice cream and opt for frozen meals and regular soda instead. They prefer items with longer shelf lives, lower prices, and easy preparation.
Because they already buy the lowest-priced items, buyers on a budget often don’t use coupons or participate in rewards programs. They also tend not to buy in bulk or shop at wholesale stores, due to the high upfront cost or lack of available storage space in their homes. The lower the income, the more likely consumers are to buy their groceries at dollar stores or mass discount stores like Walmart, Target, and Dollar Tree. They have a preference for familiar stores because they know they can get what they need at the right price.
When it comes to brands, low-income households gravitate toward cheaper, generic versions of big-name products. Conventional private label brands are especially appealing to this population because they can enjoy natural, organic, and healthy foods at a price that fits their budget.
The Hartman Group asked both low-income and value-oriented consumers to describe what good value means to them and how it influences their food and beverage purchases.
- The overall product experience motivated purchases for 81% of those surveyed, with an emphasis on taste, feelings of fullness, time-saving and convenience, and availability.
- The quality of items swayed 75% to buy, including factors like freshness, high-quality ingredients, health and nutritional content, and label certifications.
- Nearly tied with quality (at 74%) were price and size — in other words, getting the lowest price per unit. Consumers said they look for products they can use up entirely, without throwing out leftovers. For this reason, they are less likely to take risks when it comes to buying food. They want to be sure they’re buying something they (and their families) will enjoy to the fullest.
- Lastly, 43% of the study participants said they consider sustainability and social values in their purchasing decisions. Of those, they chose to buy from trusted companies that share their values and treat employees well, as well as environmentally-friendly products or products that benefit local businesses and economies.
Opportunities for food processors
Among low-income and budget-conscious consumers, there is a general avoidance of expensive items or products that spoil quickly — like fresh produce, dairy, and meat. This opens up a tremendous opportunity for food companies to market healthy, affordable products that reduce food waste. The Hartman Group suggests strategies like selling items in smaller portions and using formulations and packaging methods that extend shelf life.
You can request the full report from the Hartman Group for more details on this research.