The Food Buying Consumer – More Focused on Price Today Than in the Depths of Recession

Whether the recession has permanently changed food buying behaviour remains a favourite topic among industry observers, with some commentators are saying that purse strings are loosening, trading up is becoming more prevalent, and the worst is behind us. It would seem though that this optimism is misplaced.

The big issue is confidence, and, despite a slow crawl out of recession, consumer confidence is dropping. The latest Nationwide Consumer Confidence tracked by TNS Worldpanel shows a fall in consumer confidence driven by concerns about employment prospects, worry about the state of the economy, and a view that earnings are likely to fall in the next few months.

The Institute of Grocery Distribution says Britain is out of recession, but that things will continue to be volatile. They predict that the return to buying quality products will continue, provided of course that they justify the price, and that sales in discount stores like Aldi have peaked. They highlight the increased demand for local food and think it will continue to grow. They suggest that Fairtrade products will continue to grow too.

However, their generally upbeat take is tempered by a couple of sobering realities. They have found that shoppers are even more focused on price today than they were either when the recession was at its deepest, or when food inflation roared away in 2008.

And they expect promotional activity, which in blunt terms means cutting prices, to continue because shoppers are now specifically choosing to buy in stores which feature promotions and loyalty schemes. Whilst strong brands will continue to be important, they say a “famous name alone is no longer enough to command loyalty”.

The other thing to bear in mind when trying to assess what consumers might do is that the recession so far may have been grim for many but millions have hardly been impacted. This will change as unpleasant economic medicine is administered by which ever party wins on Thursday.

The fall in consumer confidence illustrates that whilst technically Britain may be emerging from recession, psychologically it certainly is not. If economic conditions get tighter, and it is difficult to believe that they won’t, we can expect shoppers to focus even more heavily on price and promotions. Already grocery sales growth is slowing, to 3% in the latest twelve weeks from 3.6% previously.

Where the shopper goes, the big supermarkets will not be far behind. Expect price competition to be savage, profit margins to be slashed, and demand to be sluggish.