Millennials and Gen Z prefer to splurge on groceries more than anything else

• Grocery is the most popular new splurge category for Gen Z and Millennials.
• According to McKinsey, younger generations spend more on groceries than on other categories.
• Inflation, on the other hand, affects all generations, leading to increased grocery spending.

Splurging once meant spending money on trendy restaurants, expensive vacations, and designer clothes. These days, it has fallen into a more modest category.

Groceries are becoming a top spending priority for young people, according to a February report from McKinsey & Company.

The company asked more than 4,000 people, from baby boomers to Generation X, about the categories in which they plan to splurge this year. Grocery ranked highest for Millennials and Gen Z, ahead of restaurants, bars, travel, beauty and personal care, apparel, and fitness.

Millennials are also becoming parents for the first time. That is, they spend money on themselves, their partners and children. This is a notable change from 2018, when older generations such as baby boomers and Gen X still spent more on groceries than millennials.

Meanwhile, Gen Z says spending money on high-quality snacks and drinks drives up their grocery bills.

One 23-year-old Gen Zer told Business Insider via text that he spends about $130 on groceries every week and a half. “Fancy sodas and drinks” and “random snacks at Trader Joe’s” make up the bulk of the bill. He also said he spent about $35 on protein bars.

The success of canned water brand Liquid Death shows how young people are willing to spend money on fancy food and drink. According to Forbes, the brand’s valuation has increased to $1.4 billion thanks to a recent funding round. Liquid Death investor Peter Pham previously told Business Insider that part of the brand’s success is its appeal to younger generations.

“The healthy food and beverage space has historically been a stale category full of boring brands,” Pham told BI. “This creates a lightning-in-a-bottle moment for disruptive brands that know how to leverage culture and speak to Gen Z and digital natives.”

Regardless of their preferences, every generation is feeling the pinch from grocery store inflation. Everyone is spending more than the previous year. The typical American household now needs to spend an extra $445 a month on groceries to buy the same amount of goods it was spending a year ago, according to a Moody’s report. That’s what it means.