Americans are now taking out loans just to buy groceries. What does this mean for food security, debt, and the future of everyday essentials?
EXECUTIVE SUMMARY: A new analysis reveals a dramatic rise in Americans using Buy Now, Pay Later (BNPL) services and credit cards to finance essential food purchases. This shift, fueled by persistent inflation and stagnant real wage growth, is no longer limited to low-income households-young adults and even higher earners are increasingly relying on credit to put food on the table. The surge in BNPL use for groceries, rising delinquencies, and mounting “phantom debt” highlight growing financial vulnerability and the normalization of debt for basic needs. As food retailers and restaurants adapt by integrating BNPL options, the regulatory environment remains unsettled, raising concerns about consumer protection. Ultimately, financing food is becoming mainstream, signaling widespread financial strain and prompting urgent questions about household stability, industry practices, and policy safeguards.
KEY TAKEAWAYS:
- Use of BNPL loans for groceries soared from 14% in 2024 to 25% in 2025, signaling mainstream adoption across income levels.
- Delinquency rates for both BNPL and credit cards are rising, exposing more Americans to debt cycles and financial stress.
- Food retailers and restaurants are rapidly adopting BNPL options, which may normalize debt for everyday essentials.
- Regulatory oversight of BNPL remains in flux, potentially leaving consumers with inconsistent protections.
- The trend underscores deepening financial strain, with long-term implications for food security, consumer well-being, and economic stability.
Wake up, dairy producers – your customers are putting milk and cheese on layaway plans. A seismic shift is happening in grocery aisles across America, with 25% of BNPL users financing basic food purchases in 2025, nearly double last year. This isn’t just another consumer trend; it’s a financial tsunami that will reshape dairy purchasing patterns when making critical decisions about your herd genetics, product mix, and market positioning. The profit margins you’re counting on are about to get hammered unless you adapt – fast.
MILK ON LAYAWAY? WHY YOUR BOTTOM-LINE SHUDDERS WHEN CONSUMERS FINANCE FOOD
Let’s be blunt: when your customers are putting milk on a payment plan, it’s not just an “implication” for dairy demand – it’s a seismic shift that could swallow your margins whole if you’re not paying attention.
According to fresh LendingTree research, one in four BNPL users now finances grocery purchases, up sharply from just 14% last year and nearly double the percentage from 2023. Think this only affects bargain-hunting consumers at the economic fringes? Think again. One-third of Generation Z BNPL users – your future core market – report using these loans specifically for grocery purchases, making food the fourth most common BNPL purchase category for this demographic.
What does this mean for your operation? When consumers need loans to purchase milk, cheese, and yogurt – traditionally considered cash purchases – they will approach dairy products with brutal calculation. Every dairy purchase becomes scrutinized: Is premium cheese worth financing at 24% credit card interest? Does organic milk justify another payment plan? Can they substitute your value-added dairy products with cheaper alternatives?
The implications hit different segments of your market in distinct ways:
- Your premium dairy products will likely see demand erosion first
- Your standard milk and cheese offerings face intense competition from private labels (up over 50% in the past year)
- Your specialty items become occasional splurges rather than regular purchases
So, ask yourself: Is your product mix ready for this reality? Are you diversifying across price points, or are you betting everything on premium positioning just as consumers become hyper-price-sensitive?
DEBT DEFAULTS SKYROCKETING: IS PREMIUM DAIRY FIRST ON THE CHOPPING BLOCK?
Here’s where the story gets even more concerning for your dairy business. It’s not just that consumers are financing groceries – they’re increasingly failing to make those payments on time.
A shocking 41% of BNPL users reported making late payments in the past year, up significantly from 34% just one year ago. Simultaneously, credit card delinquencies are surging, with serious delinquencies (90+ days past due) hitting 12.3% in Q1 2025 – the highest level since 2011.
For your dairy operation, these delinquencies aren’t just abstract financial statistics – they’re early warning flares of deeper spending cuts to come. When consumers miss payments on their food financing, they typically respond by:
- Drastically reducing impulse purchases (goodbye spontaneous cheese board additions)
- Trading down from premium to value options (shifting from your specialty cheeses to generic store brands)
- Cutting back on dairy protein in favor of cheaper alternatives
The timing couldn’t be worse for dairy producers investing in premium product development or specialized genetics. You’ve got facilities built, animals bred, and production lines tooled for value-added products just as your customers hit financial walls.
“When consumers start financing milk and cheese purchases, it signals a fundamental restructuring of household spending priorities,” warns Jennifer Martinez, dairy market analyst. “This isn’t a temporary blip – it’s reshaping baseline dairy consumption patterns. The dairy operations that survive will be those that can deliver perceived value at multiple price points, not just at the premium end.”
RETAIL EVOLUTION: HOW THE GROCERY BATTLEFIELD IS BEING REDRAWN
Both major dairy sales channels – grocery retailers and restaurants – are rapidly adapting their strategies in response to consumer financial pressure. Your marketing and distribution plans need to adjust accordingly.
In retail, private label products are exploding in popularity, with over half of consumers reporting they now choose store brands either predominantly or exclusively. Dairy products are leading this shift. For producers supplying branded products, this represents a direct threat to both market share and margins.
Meanwhile, the restaurant sector, traditionally where your higher-margin dairy products flow, shows troubling weakness. According to the National Restaurant Association, both same-store sales and traffic remained in contraction territory in March 2025, and the six-month outlook has deteriorated for the second consecutive reporting period.
In a desperate bid to maintain volumes, food delivery giant DoorDash recently announced a partnership with BNPL provider Klarna to allow customers to finance food deliveries. Consumers are now taking out loans to get pizza and ice cream delivered. While this might temporarily support dairy consumption through restaurants, it’s fundamentally unhealthy and unsustainable.
Want to protect your market position? You need to reassess how you’re balancing your distribution channels. Are you over-exposed to premium restaurant accounts that could see traffic plummet? Is your retail strategy adapted to the private label surge? Have you explored direct-to-consumer options that cut out middlemen and deliver better value?
“Any dairy producer still thinking ‘my quality speaks for itself’ needs a reality check,” says Michael Thompson, dairy economist. “When household budgets are this tight, ‘affordable’ screams louder than ‘artisanal’ for a growing slice of the market. Value innovation is now non-negotiable.”
THE BOTTOM LINE: STRATEGIC SURVIVAL TACTICS FOR SMART PRODUCERS
For forward-thinking dairy operations, the surge in consumers financing groceries demands immediate action. As financial pressures mount on households across demographic segments, your business needs a concrete plan to protect market share and margins.
- Develop a multi-tier product strategy – Ensure you’re capturing both budget-conscious consumers and those still able to afford premium offerings. Can you offer different packaging sizes or concentrations that hit various price points while maintaining production efficiency?
- Double down on nutritional value messaging – When every dollar counts, consumers need to believe your dairy products deliver superior nutrition. Your marketing needs to hammer home dairy’s protein, calcium, and vitamin content per dollar spent compared to alternatives.
- Explore direct-to-consumer channels – With 60% of consumers actively seeking discounts, cutting out middlemen can help you offer better value while maintaining margins. How might subscription models, farm stores, or direct delivery work for your operation?
- Rethink your co-op or processor relationship – You’re exposed to significant risk if you supply a processor focused solely on premium products. Are there opportunities to diversify or ensure your milk goes into products across multiple price tiers?
“Food financing is the canary in the coal mine for dairy producers,” warns Sarah Johnson, consumer insights specialist. “When your customers finance groceries, they question every purchase decision. Progressive dairy operations need to respond now – or watch their market position erode month by month as consumer debt reshapes spending habits.”
The writing isn’t just on the wall; it’s on your customers’ credit card statements. The dairy operations that survive won’t just be efficient milk producers but savvy market strategists who understand the financial pulse of the end consumer. The question is: Are you one of them?
Learn more:
- Navigating the Double-Edged Sword of Borrowing: Debt Management for Dairy Farmers – This article provides essential strategies for dairy producers managing their own operational debt, a critical skill as consumer-side financial strains begin to ripple through the market.
- Dairy Industry Trends 2025 – Get a broader perspective on the market dynamics, including fluctuating cheese and butter prices, that will define 2025, offering context to the consumer spending shifts highlighted in our main piece.
- How Rising Interest Rates Are Shaking Up Dairy Farm Finances in 2024 – This piece explores the direct impact of the high-interest-rate environment on dairy farm finances, a key macroeconomic factor that influences both consumer borrowing (as discussed in our main report) and farm operational costs.
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