Generic brand groceries are winning big as inflation makes a comeback

Inflation is hitting consumers hard, and both grocery shoppers and restaurants are feeling the squeeze.

According to a LendingTree (TREE-3.05%) survey of over 2,000 Americans, which the loan marketplace conducted in early January, a majority — 88% — have altered their shopping habits to afford groceries.

Among them, 44% of respondents said they’re opting for more generic brands, while 29% said they’re paying closer attention to prices. In addition, nearly 60% said they are eating out less, altogether signaling a shift in spending habits driven by rising prices.

These shifts could benefit retailers such as Aldi, Costco, and Walmart, which offer a variety of in-house brands, also known as “private labels.” Last year, Walmart led retailers in generating the largest portion of sales from its generic brands, followed closely by Target.

“The fact that so many people have changed their grocery spending habits is further proof of just how hard inflation has hit families throughout the country,” said Matt Schulz, LendingTree’s chief credit analyst. He explained that while shoppers are usually creatures of habit, rising costs are forcing many to rethink their purchases in order to make ends meet.

Inflation is also taking an emotional toll. With grocery prices on the rise, 61% of respondents indicated they experienced stress over grocery costs during the preceding month, and nearly three-quarters of those making less than $30,000 a year reported increased anxiety.

The restaurant industry is also taking a hit. 85% of consumers said inflation has changed their dining habits, according to LendingTree. Most notably, 59% are eating out less, 29% are scrutinizing menu prices, and 24% are actively seeking coupons or deals. Inflation is also impacting tipping habits, with some consumers reporting they’re either tipping less or not tipping at all on takeout and delivery orders.

The sector, currently on edge, has urged President Donald Trump to exempt food and beverage imports from a proposed round of tariffs set to take effect on March 4, which could cost the industry $12 billion. According to the National Restaurant Association (NRA), a 25% tariff on food and drinks from Mexico and Canada could lead to higher menu prices, further burdening consumers and making dining out more expensive. Retailers tend to pass on the cost of tariffs to consumers.

As inflation continues to tighten budgets, purveyors of generic brands stand to benefit, especially as shoppers prioritize savings without sacrificing essential goods, such as eggs and bath issues.