Conscious spending in turbulent times

55% of consumers globally are extremely concerned about the impact of inflation on their household budget according to a Q3 2022 GlobalData consumer survey. Although inflation is a global topic currently, especially Western economies having the highest inflation rates, with the US & UK seeing 40-year highs and Argentina and Turkey currently experiencing hyperinflationary environments.
 

How consumers are reacting to the inflationary environment

Financial uncertainty results in two major consumer strategies:
 

Source of image: GlobalData

This means consumers either opt for back-to-basics options or look for real added value solutions. The space in the middle ground of the mass market will feel the most pressure.

Which of the routes consumers take depends a lot on the respective category or goods consumers consider purchasing. They are much more likely to cut back on discretionary spending like dining out or other leisure activities. Also, non-essential categories, like electricals or furniture, are going to be hit hard by consumers not buying at all or delaying bigger purchases.

Conscious spending on food & drink

“Food and drink are a necessity, making it more resilient to cost of living crises than other, more discretionary, categories.”
– Jonny Forsyth, Director – Mintel Food & Drink

Although the food & drink category is essential and thus less impacted by the rising costs than other categories, conscious spending is still top-of-mind for many consumers in this category: In food choices, cost and value for money have become more important to every second consumers globally (Source: Innova Market Insights).

According to the FMCG Gurus survey on the rising cost of living in 2022, consumers will react in the following ways to increasing food and drink prices:

Opportunities for food & drink manufacturers

Although circumstances are turbulent, there are also opportunities for food & drink manufacturers: Remember the credo “don’t confuse value with low cost!”

We have identified the following opportunities for food and drink brands:

• Premiumization: Value through added functionality or benefits:
  • Functional foods: 74% of consumers globally are willing to pay extra for products with certain health benefits. (FMCG Gurus)
  • Natural foods: For 71% of consumers globally, products that are free from additives are worth paying more for. (FMCG Gurus)
  • Sustainable products: 66% of consumers globally are ready to pay more for products that are environmentally friendly. (FMCG Gurus)
  • Quality products: For more than 40% of consumers globally, “good value for money” in food products means high quality ingredients.
     
• Increased luxury spending: Consumers will consciously use disposable income on selected premium items. Food is not just nutrition but is often associated with a treat or reward. Especially more indulgent categories like ice cream, confectionery or snacks fall into this area. There are many opportunities to create affordable “escape moments” of indulgence in everyday life with food & drink products.
   
• Increased volume: Instead of buying less, some consumers will buy more. We see two patterns here: 1) Purchasing bigger pack sizes: The value for money ratio is usually better for bigger pack sizes and thus an increase of family-pack products can currently be observed for food & drink products. 2) Purchasing multi-pack offers or bulk: Some consumers will also turn to promotions more and stockpile goods at home they purchase at the best value for money point.