Inflation: How this AI-powered grocery service uses technology to combat price hikes

Grocery delivery service Hungryroot says it's prepared for inflation — thanks to AI-powered technology.

"Seventy percent of the groceries that are purchased on Hungryroot are chosen by our algorithm — not by the customer," CEO Ben McKean told Yahoo Finance in a new interview.

"That's part of the value proposition that we offer. Our system gets to know our customers and therefore gets to be very effective at choosing their groceries for them," he added.

Hungryroot, which has seen 35% year-over-year growth, has never once raised prices in its seven-year history — even though McKean admitted that "inflation is very real...the highest it's been in the food industry since 1981."

Still, "the inflation impact that we've seen has actually been much lower than the industry as a whole," he said, further explaining how the company's algorithm is able to offer solutions and alternatives after taking "into account price sensitivity and [price increases] in ways that traditional grocers cannot."

Hungryroot also benefits from bulk ordering (often viewed as a more economical choice for consumers) with average orders amounting to $120 per shipment versus the industry average of $60, according to McKean.

"That allows us to price the service competitively," he noted.

Coupled with the company's added perk of pairing deliveries with 10-minute or less recipes, the executive said the brand is helping consumers save time, eat out less and minimize food waste.

"We believe that we're actually going to perform very well in an inflationary environment," the CEO reiterated.

Frozen food category surges amid inflation

Eliminating food waste has become an increasingly important element for today's price-conscious shopper.

Saffron Road, which manufactures clean-label frozen food products and better-for-you meals, noticed an uptick in sales over the past few months as more consumers gravitate toward frozen items amid the current economic environment.

"The last six months, we've been on a tear," Adnan Durrani, Saffron Road CEO, previously told Yahoo Finance, adding that the brand has seen "record months, every month."

Durrani explained that the frozen food category outgrew fresh by 230% this year — a growth rate the executive had never seen before in his decades-spanning career.

Historically, "fresh usually always outpaces frozen, but what we're seeing now is a dramatic shift."

McKean agreed that frozen food sales have largely increased due to the category's longer shelf life and ease of cooking — two benefits that Hungryroot also supplies "but with fresh food."

"The vast majority of the recipes that Hungryroot offers are less than 10 minutes to cook, and — because the service is designed to maximize the utilization of the food we're sending — food waste is not really an issue," the executive said.

"As a result, we're able to offer the benefits of frozen, but in a fresh format, which is much preferred by our customers."

Overall, recent data seems to support the shift away from traditional grocery shopping with more consumers embracing delivery.

According to the latest report from mobile analytics platform data.ai (formerly App Annie), grocery delivery apps saw a 40% increase in downloads compared to the previous year — representing 25% of all downloads in Q1 2022.

Engagement grew even faster with total sessions up 70% year-over-year to 8.6 billion globally.

"Growth in food & drink downloads indicates the market is ripe for user acquisition, but competition is heating up," Lexi Sydow, head of insights at data.ai, said in a press release.

"Growth in total sessions highlights that consumers are forming habits and relying on these apps more than ever to access appetizing food — restaurant-quality or home cooking ready — at the tap of an app," she continued.

Alexandra is a Senior Entertainment and Food Reporter at Yahoo Finance. Follow her on Twitter @alliecanal8193 and email her at alexandra.canal@yahoofinance.com

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