Consumer Sentiment, ID Sales, and the K-economy

As a grocery analyst, my focus is using data to make sense of the world.  One of my interests is the K-economy.  Is this a thing or something that bloomed in the media without much evidence?  My other focus has been on how things have shifted post-COVID.  This post covers both.  It attempts to use data to show the K-economy visually and determine whether this happened post-COVID or has always been around.

The post will focus on consumer sentiment and ID sales by grocery channel – Hi-Lo, Premium, Warehouse, and Mass.  Consumer sentiment is particularly interesting because it has been tracked since 1953 and we are at historic lows.  That means it is lower today than it was during the Vietnam War, the Oil Crisis in the 1970s, the 20% mortgage rates and major recession of the 1980s, the 2008 financial crisis when more than half of the adults experienced some work related hardship (Pew Research), and a global pandemic.  Many will say that the population has become more jaded over time and they may be right, but it is undeniable that people are uncertain and struggling.

Digging into consumer sentiment, the chart below shows consumer sentiment by income, broken out by bottom, middle, and top third of HH income.  As expected, the overall trend is down since COVID, and we can see noticeable gaps from 2016-2019 and from mid-2023 through today. In 2016-2019, the middle and high-income buckets scored much higher than the low-income bucket, but in mid-2023 and 2024 we see the high-income bucket breaking away. In early 2025, all income bands dropped significantly and converged but have spread again since, with the middle bucket now closer to the high-income bucket.  The middle bucket has more impact on the overall reading than the other two. The buckets are equally weighted and the top and bottom tend to sit at the extremes, so the middle sets the center of gravity. When it moves toward the high-income bucket, sentiment is elevated; when it aligns with the low-income bucket, sentiment softens.

What does this say about the K-economy? It does suggest that consumer sentiment has varied by income levels pre- and post-COVID.  But it also shows that 2024 was a bit different because of the magnitude of the gap. The high-income bucket was clearly higher than the mid and lower buckets.  This does suggest we did see something a bit different across income levels in 2024, but 2025 is looking more like pre-COVID both in gap and in the middle bucket sticking closer to the high-income bucket.

Shifting to ID sales by grocery channel. Are we seeing the K-economy in the numbers and is there a difference in the trends pre- and post-COVID? In the chart below, we see ID sales by channel back to 2016. Prior to the pandemic, the average gap between the max and min was 3.5% but since 2020, that gap has almost doubled. And even when we remove 2020 and 2021, the average gap is 5.3%.

Do these consumer sentiment trends explain any of the channel ID sales trends? Based on the consumer sentiment numbers, we would expect Premium banner ID sales to outperform in 2023-2024.  Looking at the ID sales chart below, which focuses on 2023-2025, we can see Premium channel ID sales starting to grow in 2023 and then outpacing the market in 2024 and early 2025.

Is the market different after COVID and is the K-economy a thing? The sentiment gaps were about the same, and pre-COVID numbers showed the middle bucket aligning mostly with the high-income bucket. There was a clear break from this pattern in 2024, when high-income sentiment broke away and the Premium channel posted double-digit ID sales growth.  We also see smaller price increases today, but they are on top of 33% increases since 2019, which keeps lower- and middle-income HHs highly price sensitive, supporting Mass and Warehouse ID sales. Both factors help to explain why ID sales gaps were larger after COVID and why Hi-Lo continues to struggle.

Today, we also see another gap in ID sales, Hi-Lo and Premium vs. Mass and Warehouse, in 2025Q4-2026Q2.  Mass and Warehouse are holding while Premium and Hi-Lo fall. Premium is lapping big numbers, but Hi-Lo is not, and it is clearly underperforming.  When the K is pressing on the economy and shoppers, Hi-Lo struggles to compete on quality vs. Premium banners and struggles to compete with Mass and Warehouse on price. The latter is particularly hard on Hi-Lo because of its poor price perceptions and the willingness of shoppers to drive past the local supermarket and go twice as far to a big box.  This has been happening for decades but is more pronounced when HH budgets are squeezed, like today.  Local supermarkets simply do better when consumer sentiment is higher and HH budgets are not so squeezed. 

The good news is that this is likely temporary, and when tariffs and the Iran conflict are resolved, prices and interest rates should come down. This will provide HHs with a bit more breathing room. At that time, we should see the consumer sentiment and Hi-Lo ID sales numbers improve.