Eighty-five percent of global consumers, and 81% of UK consumers, say rising food prices will impact their choice of grocery products, according to a new study by Nielsen, a leading global provider of information and insights into what consumers watch and buy.
The Nielsen Global Survey of Inflation Impact surveyed more than 29,000 internet respondents in 58 countries to understand how respondents around the world of all income ranges adjust to rising food prices.
Impact of rising food prices on areas of spending
Nielsen’s information shows that in-home food products were not the only areas of spending that would be impacted by rising food prices. Areas where UK respondents would change their spending include, in descending order: buying new clothes (63%), dining out (60%), spending on snack food (54%), paying for recreation and entertainment (43%) and travelling for vacation (37%). Global consumers cited the same areas in slightly different positions: dining out (64%), buying new clothes (55%), spending on snack food (45%), paying for recreation and entertainment (44%) and travelling for vacation (39%).
When asked about likely spending changes to specific food categories, 14% of global respondents indicated they would buy more loose, unpackaged, unbranded cereal, such as rice, wheat and grains (13% in UK). Eleven per cent said they would stock up on fresh or frozen fruits and vegetables (8% in the UK), and 8% said they would buy more canned fruits and vegetables (7% in the UK).
More than half of respondents had no plans to change their spending on staple categories like: dairy products (globally 68%, UK 82%), meat and poultry (globally 62%, UK 71%), bread and bakery goods (globally 60%, UK 79%), packaged foods (globally 55%, UK 74%) and fish and seafood (globally 52%, UK 64%). This contrasts with discretionary categories. If food prices went up, far fewer respondents said they would buy the same amount of alcoholic beverages (globally 23%, Europe 26%, UK 37%).
Nielsen senior vice president for global consumer insights James Russo said: “Traditional trade is still dominant in many countries, and in these markets, commodity purchases are part of consumers’ daily lives. The challenge for marketers will be introducing new brands and products when food inflation is suppressing the ability for these consumers to grow their shopping baskets.”
Impact of rising food prices on private-label brands
According to Nielsen, private-label or store brand products account for approximately 16% of global FMCG value share. Nielsen’s survey shows that in developed European countries, 35% of consumers would shop more for private-label brands when food prices rise (39% in the UK), compared with only 8% (5% in the UK) that would increase shopping frequency for branded goods. In North America, 46% of respondents said they would shop more for private-label brands, compared with 7% that would buy more branded products.
Russo said: “Private-label brands have a potential advantage during inflationary times. However, the price must be right and marketing must be effective for private-label brands to succeed. Packaging impacts trust and quality perceptions, especially when private labels extend beyond commodity or low-risk product categories.”
Impact of rising food prices on where consumers shop
When asked about how rising food prices may affect where they purchase grocery items, one-third (33%) of global respondents indicated they would shop more at discount stores (30% in UK); 28% would shop more at de-stocking/clearance stores (21% in the UK); and 23% would shop more at hypermarkets/mass merchandisers (13% in the UK). Twenty one per cent said they intended to grow more of their own food (18% in the UK); and 17% would shop more at local neighbourhood stores (just 9% in the UK).
Russo again: “When it comes to rising food prices, nearly everyone feels the pain. Determining which product categories have staying power and which are more vulnerable is critical as consumers make trade-offs and tough in-store decisions. Likewise, as consumers continually look for ways to stretch their budgets and find the best value for money, marketers need to identify retailers that will satisfy the unique demands of consumers around the world.”
Impact of rising prices on how consumers shop
During times of rising food prices, 41% of global consumers surveyed said they would purchase only sale-priced items (32% in UK). Thirty two per cent of respondents said they would look for deals online (31% in UK), and 29% said they would purchase larger pack sizes (25% in UK). Other saving strategies varied, based on regionally-motivated shopping patterns. For example, transportation and storage/refrigeration space was not an issue for 50% of North American respondents (or 48% of Brits) who said they would stock-up while items were on sale, compared with 34% of Asia-Pacific respondents.
“Understanding brand position within the category demand landscape allows for a tailored food inflation response that will protect the most profitable shoppers with optimum efficiency,” said Russo. “While the strategic response to consumer buying behavior may be consistent across regions, market-by-market tactical variations are essential.”
Russo concludes: “With the global middle class growing by 70 million each year and food prices expected to more than double within 20 years, FMCG companies in many markets are preparing for an unprecedented period of rising demand, economic pressures and aspiration-driven buying behaviour.
“FMCG companies focusing solely on consumer income as a barometer of spending habits, however, are unlikely to fulfil their business growth expectations because this is not a middle-class only trend. Food inflation impacts consumers of all incomes. By looking instead at consumer diversity, spending flexibility and the consumer demand landscape, FMCG companies can better understand real-world buying potential and more accurately scale goods and services to meet the needs of consumers in both developed and developing markets around the world.”