In recent years, consumers have been subjected to sharp and sustained increases in the cost of goods and services, resulting in what we now call the cost-of-living crisis. From emergent energy spending to emerging food spending, the monetary strain has been relentless. And, as a result, it has replaced the way consumers spend and save.
According to monetary forecaster Trading Economics, customer confidence in Europe has been declining over the past decade and reached an all-time high of -29. 70 issuances in September 2022. At the same time, many have noticed their incomes being frozen as employers have adapted. plans and halted wage increases to deal with ongoing economic hardships.
In the aftermath of this great storm, consumers have been gradually adjusting their behaviors to accommodate the relief in disposable income. But this effect is not limited to European consumers: the effect is being felt around the world.
“The cost-of-living crisis is impacting customers around the world,” explained Will Cowling, CMO of FMCG Gurus, in the IFE 2024 keynote. What’s more, customers’ trust in the economy and private finance is rarely fair. “It’s getting worse,” Cowling adds.
This creates an additional challenge for governments and manufacturers, as persistent confidence in the economy leads to further spending cuts and higher savings, which, in turn, further erodes confidence in the economy.
This loss of economic confidence can lead consumers to think that their country is in recession, even after the recovery. FMCG Gurus found that only 25% of consumers lately have confidence in the economic outlook for the year ahead, despite a recent drop in inflation. in many countries and regions, including the EU and the UK.
“Consumers are worried that they don’t have enough savings for their households,” Cowling adds. In fact, in the fourth quarter of 2023, only 37% of global consumers felt they had enough household savings.
“Consumers are not confident in their personal finances and that will have a direct effect on their food shopping behaviors in the future. “
The effect of the emerging life burden, coupled with a lack of consumer trust, has led customers to update their spending behavior across all spaces of their lives.
“Consumers are feeling financially pressured and are looking to make basic lifestyle adjustments to increase their cash. They cut back on big-ticket items, don’t buy new clothes, and don’t indulge. They’d rather walk than walk. ” We are trying to save money on fuel and, of course, in the last 12 months we have also noticed a noticeable increase in the proportion of consumers looking to restrict their energy consumption due to emerging prices. “says Cowling. “
But how is the emerging life burden impacting customer behaviors in food and beverage?
According to watchdog Which, the cost of food is the number one fear for consumers: 85% of consumers are as concerned about food costs as they are about energy costs.
In the face of food price cap considerations, consumers continue to look for tactics to reduce their food bills, revealing that 54% of consumers would have purchased less expensive products than before the cost-of-living crisis.
When it comes to emerging food and beverage prices, consumers understand essentials like bread, milk, pasta, and cereals over luxury ones like chocolate and wine.
“When assessing price inflation, consumers are more likely to think that commodity prices have risen,” Cowling says. This results in a very planned avoidance of more expensive luxury items, to cope with the growing demand for items. .
FMCG Gurus found that around six out of ten international consumers are actively saving money on their shopping bills. This means that other people compare and decide which products are a must-have and which products they can avoid buying. So, what products are consumers avoiding lately?
“Snacks, alcoholic beverages, processed foods, frozen foods, and convenience beverages are all spaces where consumers need to cut back on spending,” says Cowling.
This avoidance of non-essential food and beverages is felt in the service sector.
“Three out of four people worldwide have tried to reduce their spending on food and beverage channels over the last year,” says Cowling. “People need to cut back on more casual, casual occasions, like grabbing coffee on the way to painting or grabbing a lunchtime snack, and they’re preparing more meals. “
Consumers are increasingly interested in cash pricing, and when it comes to purchasing decisions, “a good cash price is more vital than low charges,” Cowling says. That’s not to say that the charge is rarely very vital and consumers are price-sensitive, but they need to feel that the product they’re buying is worth it.
“No matter the price of a product, other people probably wouldn’t buy it or would buy it again if they associated it with poor quality. “