Deep inflation
FDF continues to call on the government to conduct a robust review of regulation and to act where that's adding to price rises. Image: Shutterstock
Inflation has increased sharply in recent months in many countries around the world compounded by supply chain problems and the rising price of energy.
Rising inflation means substantially reduced purchasing power. Increased prices will see some buy fewer things, but more will look to trade down to lower priced items, look for product promotions and may turn to private label.
Consumers have already changed purchasing behaviours throughout the pandemic and certainly now in today’s inflationary environment. It’s interesting to note what specifically will change minds. According to a new survey commissioned by specialist PR agency Ingredient Communications and conducted by SurveyGoo, consumers will stop buying a product when its original price has risen by an average of 40%.
When asked to select the point at which they would stop buying a selection of food, beverage and nutrition products due to price rises, using a scale of +5% respondents said they would buy this product ‘whatever the price.’
Overall, the results indicated that shoppers were more immune to price increases for low-cost staple goods. For example, the category in which consumers were least price sensitive was milk (dairy), which could increase in price by an average of 65% before respondents would stop buying it. This was followed by bread (62%) and fresh vegetables (60%).
Conversely, there was greater resistance to cost increases in nutrition categories. For instance, respondents said they would stop buying protein powder once the price had risen by an average of 17%. The corresponding pinch point was 23% for probiotics, 26% for dietary supplements, and 28% for Omega 3 fish oil supplements.
Just over 1,000 US and UK consumers answered a series of questions designed to reveal just how price-sensitive they really are (SurveyGoo surveyed 1,063 consumers online in December 2021 (532 UK, 531 US).
There’s no getting away from the fact that behaviour will be impacted if price increases are not carefully managed. Shoppers are very likely to pick and choose among different retailers and brands even more than they’ve done so in the past.
Retailers and manufacturers will end up aligning price increases with consumers’ perceived value of product whether that’s in terms of the ingredients, packaging or provenance. Misjudge this and consumers may feel a product is no longer worth the extra money, they will trade down to an alternate product or even avoid purchasing the product.
The survey findings indicate that consumers are happy to shop around to offset the impact of upward price pressures. Nearly half of respondents (48%) said they had switched to a cheaper brand in the previous three months as a result of price rises, while 26% said they had changed to a retailer’s own-label version of the same product.
Richard Clarke, managing director of Ingredient Communications, said: the challenging market conditions, will force brands to work hard to retain consumer loyalty. “An effective way to achieve this is to demonstrate added value by using high quality ingredients that provide clear differentiation and command high levels of trust, whether that’s through proven efficacy, sustainability, strong co-branding, or a combination of these,” he added. “These values, communicated effectively, will tie a consumer to a brand more closely, mitigating the impact of price increases on purchasing behaviour.”
Inflation is not going to dissipate for a while yet. Retailers and manufacturers will have to build suitable plans to manage the current situation. Consumers are clearly doing their best to cope and will elect to make spending decisions even more carefully than in the past, choosing to buy from companies that customers think are doing the best job.
- Rodney Jack, editor, Food & Drink Technology.
Keep in touch via email: rodney@bellpublishing.com Twitter: @foodanddrinktec or LinkedIn: Food & Drink Technology magazine.
