Grocery shoppers looking through “new lens of affordability”

Posted by Editorial on 26th February 2009

Consumers have been slashing their spending for the last several months, feeding the already painful recession as millions of households are opting to save rather than buy.

Within the consumer packaged goods (CPG) industry, escalating prices and stagnant wages are also causing consumers across all income levels to be extremely price sensitive, so some are turning to private label and lower-tier brands to save money or are deciding not to purchase items at all. Information Resources, Inc. (IRI) has just released its latest research, “The Affordability Report: Rethinking the Consumer Value Proposition in a Challenging Economy,” a review of which categories are most important to shoppers and which categories are at risk of shoppers trading down and/or trading out.

“Consumers are continuing to feel the pinch, and they are looking at all of their purchases through a new lens of affordability,” IRI Consulting and Innovation President, Thom Blischok, suggested. “Consumers are no longer asking themselves, ‘Do I want this?’ They are asking, ‘Do I really need this?’ Retailers and manufacturers need to truly understand today’s shoppers like never before and respond to their affordability-driven needs and attitudes to succeed in this challenging environment.”

Among the categories likely to be affected is the dairy sector, while alcohol is one of the more insulated sectors. This has already been seen to a certain degree in Australia, with a number of dairy categories being suscpetible to the rise of private label – something which has been seen over the past decade. While the lack of interest in private label amongst supermarkets in alcoholic categories has ensured that a ‘trade-down’ is less likely. Lion Nathan, Australia’s second largest brewer, last week reported that the premium segment had actually been a key to their 9% volume growth.

However, the recent poor results of a number of major alcoholic beverage producers overseas indicates that while a trade-down may not occur, a ‘trade-out’ or cutback could – if the Australian economy deteriorates further.

“Understanding shopper behaviour across all income levels is critical for driving retailer and manufacturer performance, but tapping into these ever-changing behaviours is not easy,” Sean Seitzinger, senior vice president, IRI Consulting and Innovation, concluded.