Millennials and Gen Z's trendy new splurge: groceries

Younger generations say they plan to spend more on groceries than travel, beauty, apparel, and fitness, according to a report from McKinsey.

• Groceries are the hottest new splurge category for Gen Z and millennials.
• Younger generations spend more on groceries than other categories, according to McKinsey.
• Inflation is impacting all generations, meanwhile, leading to higher grocery expenses.

Splurging once meant spending money on buzzy restaurants, expensive vacations, and designer clothing. These days, it has succumbed to a more humble category.

Groceries are shaping up to be a top spending priority for younger generations, according to a February report from McKinsey & Company.

The firm asked over 4,000 people, from baby boomers to Gen Xers, about the categories they intend to splurge on this year. Groceries ranked highest for millennials and Gen Zers, outpacing restaurants, bars, travel, beauty and personal care, apparel, and fitness.

Millennials are also becoming parents for the first time. That means they spend on themselves, their partners, and their children. It's a notable shift from 2018 when older generations like baby boomers and Gen Xers still spent more on groceries than millennials.

Gen Z, meanwhile, says the money they choose to spend on high-quality snacks and beverages makes for expensive grocery bills.

One 23-year-old Gen Zer told Business Insider by text that he spends about $130 for a week and a half on groceries. "Fancy sodas and drinks" and "random snacks at Trader Joe's" account for the bulk of the bill. He also said he spent about $35 on protein bars.

The success of the canned water brand Liquid Death also shows how young people are willing to spend on flashy food and beverages. The brand recently shot up to a valuation of $1.4 billion thanks to a recent round of funding, according to Forbes. Peter Pham, an investor in Liquid Death, previously told Business Insider that part of the brand's success comes from its appeal to younger generations.

"The healthy-food-and-beverage space has historically been a stale category filled with boring brands," Pham told BI. "This creates a lightning-in-a-bottle moment for disruptive brands who know how to tap into culture and talk to Gen Z and digital natives."

No matter their preferences, all generations are feeling the pinch from inflation at grocery stores. Everyone is spending more than they were in previous years. The typical American household now needs to spend $445 more on groceries a month to purchase the same amount of goods they were spending a year ago, according to a report from Moody's.