Economy makes food consumers trade down
Consumers wracked by threatened or actual job loss, pay cuts and other economic problems are changing their spending patterns for food and drink in several ways.
Private-label goods, as might be expected, are getting a big boost. Sales of store-brand products increased 10% through most of 2008, compared with 3.5% growth for name brands, according to a Nielsen survey. Kroger Co. found that 14% of its customers reported buying a store-brand item instead of a national brand during the last quarter of 2008.
The recession also is affecting consumer acceptance of premium prices for organic and natural foods. Although demand is still growing, the rate has slowed considerably. Year-over-year sales for December were up 5.6%, compared with 25.6% the year before, according to Nielsen.
Organic Monitor, a consulting firm specializing in organic products, notes that the remaining demand is being pushed to more downscale products and venues, which is one reason Safeway is now the leading U.S. retailer of organic food. The Organic Monitor report goes on to note that falling demand is expected to bring down prices in the near future.
The situation is creeping into consumer consciousness in all sorts of ways. Every Day with Rachael Ray, the popular chef’s consumer magazine, is instituting a regular feature called “Supermarket 101,” which will consist in part of tips on saving money through avoiding “hidden” grocery costs and using online services.
The good news, such as it is, for food companies is that the bad economy is motivating people to eat in. Numerous studies have confirmed this, including one from consulting firm BrandSpark Int’l that reported 52% of respondents plan to eat at home more often in 2009 than 2008.