IRI report reveals that with no sign of inflation dropping for the near future, consumers are displaying signs of severe ‘inflation fatigue’ that is forcing a range of coping behaviours not seen since the austere late 70s and early 80s
Shoppers surveyed tell of the return of the packed lunch, ‘staying in’, buying reduced products even out of date, and for some in crisis, running down savings as consumers take control and adapt with far-reaching changes
Bracknell, UK – 09:00 (BST) 24th October 2022 – The latest biannual ‘FMCG Demand Signals’ report from IRI has launched today, revealing significant changes in the way consumers are coping with a cost of living crisis unlike any they have experienced before. With inflation pressures intensifying throughout 2022 on volatile energy prices and supply-side shortages pushing up input costs even further, consumers disposable income, confidence and spending has now reached crisis levels across key European markets.
Forensically unpacking the impact of the pandemic, inflation and the cost of living crisis on over 230 FMCG categories, 2000+ product segments and over a 100 million SKUs across the US and several of the largest markets in Europe (France, Italy, Germany, Spain, UK and Netherlands) and Asia Pacific, the report, which covers data from in-store purchases and a survey in 12 global markets, flags that deteriorating disposable income is plaguing middle- and low-income consumers across the developed world.
Growth in FMCG category sales has softened to 1.5% in 2022 adding €9bn in value sales vs. year ago – down from 3% in the previous year. The latest figures covering the year-to-date are promising at 2.6% driven in large part by inflationary price increases rather than growing demand. The contribution in growth from pent-up demand as restrictions eased, resurgent mobility from consumers returning to the office and taking holidays has faded. In fact, consumers are having to dip into personal savings to survive.
Categories fueling 2022 growth have been identified as Chilled & Fresh, Ambient, Beverages & Personal Care products, however this has been partially offset by declines in alcohol sales (5% drop) and household care (0.2% drop) products.
“The ongoing slump in unit sales in response to inflation is an early indication of softness in FMCG demand," commented Ananda Roy, Global SVP, Strategic Growth Insights, IRI. “Unable to deliver every day lower pricing deals – and even maintain prices – because they’re experiencing higher input costs themselves, means brands and retailers need to look again at how they can support consumers throughout this very difficult period. We’re witnessing the biggest movement in consumer behaviour in over five decades, with shoppers questioning ‘Do I really need it?’, ‘Can we still afford to make a sustainable or altruistic choice?’ and now ‘Use less, waste less’.”
Key European highlights:
- Over half of consumers are in crisis – 61% of consumers surveyed in Europe’s largest markets say they are worried about the impact on them personally and 71% have already made changes to how they buy and use everyday items. Remarkably, 58% have now cut down on essentials (driving to work or shop, missing meals and reducing heating) with 35% dipping into their personal savings and taking out loans to pay bills. Any money saved up over the pandemic has been drawn down to meet everyday living costs.
- There is a clear understanding of what’s happening in the market and what to do – As the impact of the energy crisis, weakening economy and high prices take root, consumers have begun to take control and be better informed of fast-moving changes in the economic environment. 74% of consumers surveyed by IRI say they understand the issues causing inflation and 69% say they’re able to reasonably predict its impact on their day-to-day personal finances.
- Consumers are adapting - Shoppers are taking control of their expenses to moderate the impact of high levels of inflation across a wide range of everyday purchases, especially food and other staples. They are choosing where to shop to moderate the effects of the crisis – be that via another channel, another retailer if their regular brand isn’t available (26%) on promotion (34%), or if the shop doesn’t have a wide enough range of deals (41%). They are switching to discounters who have expanded their stores into town centres and residential areas with a small but well-priced range of products at lower prices than the big retailers.
- Shoppers must now think ahead to get the best value and stay within their budget - Planning in advance how often the shop (22% are likely to make fewer trips) and how much they spend (21%) is a change some consumers are having to make. 58% are also comparing prices more often between similar brands or products; interestingly 49% are comparing how much product they need to use to get better value (washing powders, as an example) so they can use less without sacrificing the benefit; and in the case of foods, waste less.
- Product Labels now play a huge role – 41% of shoppers are reading packaging labels for more information. 27% are looking more often for independent reviews of everyday products, not only more expensive items, to justify purchase. 40% of shoppers surveyed said they are looking more frequently for reduced items even if they are slightly out of date.
- Shoppers are creating new occasions, moments, and contexts for consumption of familiar everyday products – 29% are changing where they consume everyday products (at-home, on-the-go, outside venues), taking a packed lunch, staying in for drinks with friends rather than going to a bar, showering at the gym or at work, enjoying specialty coffees at home and replacing visits to the salon with hair styling and grooming products that can be used inexpensively at home.
- Where shoppers eat is changing – Just over half of shoppers plan to order less cooked food to be delivered at home (51%) and 47% plan to eat out less – at a restaurant, bar or café. The pandemic trend to cook at home from scratch continues with 49% of consumers surveyed say they plan to cook fresh. A new trend, harking back to previous generations and not culturally present in many European countries like the UK is the return to cooking at home for out of home occasions – including the return of the packed lunch – 34% of consumers say they intend to do so. A relatively smaller proportion of consumers (12%), mainly urban, professional and in the middle-to-high income consumer groups, plan to get more fresh meal boxes and kits to cook at home despite the higher price.
- Shoppers still make room for new products – Choosing a new brand is influenced by price (62%), being readily available (49%) and high levels of on-shelf promotion (37%). Less important is being of better quality (15%), innovative (8%) and about making shopping easier (8%) because consumers expect any new product on-shelf will meet a retailer’s stringent standards. Meeting emerging consumer needs, for example, a wider variety of condiments and ambient fillings inspired by global tastes for packed lunches, pre-mixed spirits and quick commerce delivery for those staying in, and innovative packaging, convenient sizes and recyclable packaging, make familiar products more versatile in new settings such as Personal Care products used beyond the home in a gym or office.
- Healthier and plant-based options are consideration drivers (24% and 22% respectively) - However these products from a socially responsible company or a product that was better for the environment are not always the first-choice purchase drivers (both at 10%) which is still led by availability, at a good price and on promotion.
Roy continued: “It’s evident that consumers’ willingness to spend is suffering and the direction of travel is likely to worsen – with the likelihood of further sharp price rises given high input costs and volatile energy prices - but it’s positive to see that consumers are getting better informed and taking control, and adapting to cope better with a significantly constrained standard of living. Brand manufacturers and retailers who have fueled the consumers’ expectations to receive the highest quality and innovation, all year round and out of season, at the lowest possible price be it food, cosmetics, apparel or household products; are now unable to deliver. The tide has truly turned and a whole generation of consumers are experiencing a declining standard of living (not just a cost-of-living).
“Gone are the days of the one-stop weekly shop, we’re expecting to see an increase in shopping around for must-have products and the consumption of less expensive seasonal goods. There are several difficult decisions for shoppers on the cards, and retailers and brands will do well to take a long and hard look at how they’re going to respond to shopper needs.”
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About FMCG Demand Signals
IRI’s ‘FMCG Demand Signals’ report describes value trends across food and non-food categories, across channels, pricing and promotions, and identifies key growing and declining categories. The focus on manufacturer and retail trends, spotlights on distribution, pricing, innovations, and item-level demand complete the picture.
IRI’s data scientists study billions of transactions across the USA and several of the largest European and Asia-Pacific markets to provide clarity on what drives commercial value.
‘Demand Signals’ is a biannual report powered by Liquid Data® and Unify®, a proprietary technology platform that clients use to interrogate key performance measures as they happen.
IRI’s next Demand Signals report will appear in February 2023 and will cover a summary of the full 2022 year, and the second half of 2022, detailing the effects of the inflationary impact on household consumption and discretionary purchases.
The consumer behaviour insights originate from IRI’s ‘Crisis At Every Step’ Inflation Survey; which was conducted across 3,000 shoppers from the USA, Australia, New Zealand, Brazil, Turkey, UAE and in Europe (UK, France, Spain, Germany, Italy and The Netherlands.
IRI is a leading provider of big data, predictive analytics and forward-looking insights that help CPG, OTC health care organizations, retailers, financial services and media companies grow their businesses. A confluence of major external events — a change in consumer buying habits, big data coming into its own, advanced analytics and personalized consumer activation — is leading to a seismic shift in drivers of success in all industries. With the largest repository of purchase, media, social, causal and loyalty data, all integrated on an on-demand, cloud-based technology platform, IRI is empowering the personalization revolution, helping to guide its more than 5,000 clients around the world in their quests to remain relentlessly relevant, capture market share, connect with consumers, collaborate with key constituents and deliver market-leading growth. For more information, visit www.iriworldwide.com