Table of Contents
- Overview
- CONTENTS
- Table of figures
- THE FUTURE DECODED
- INTRODUCTION: Industry players must implement tactics that help overcome
the negative impact of the economic downturn
- TREND: Economic trends are pressuring consumers into a ' re cessionary
mindset'
- The state of the economy is a dominant and growing consumer concern in
the current downturn
- Property price and mortgage lending contractions have been a key force
souring consumers' outlook
- Consumers have funded their continued spending with unsecured debt
- The credit crunch is catching up with marketers' favored consumers:
18-24 year olds
- Commodity prices are the biggest threat to consumers' general spending
behavior
- Food prices in particular represent a central issue for consumers
- Escalating fuel prices are also a significant threat to CPG spending
- Key take-outs and implications: structural economic issues are at the
root of consumers' emergent ' recessionary mindset'
- TREND: Declining consumer confidence is influencing shopper attitudes and
behaviors towards groceries
- The US sub-prime crisis is shaking national confidence levels not only
in the American markets but in Europe and Australia
- Consumers are cutting their spending habits back
- Recessionary consumers are looking to save rather than spend
- Retail sales are in decline in the US and most major European economies
- Recessionary consumers are looking for value for money in their CPG
purchases
- Price cutting can be a lure to value-conscious consumers
- On-trade behaviors are changing to reflect consumers' financial
sensitivity
- Cost-conscious consumers are going out less
- Consumers are looking to recreate the on-trade experience at home
- Key take-outs and implications: cautious consumers want good value but
still expect high quality
- INSIGHT: Recessionary consumers exhibit an attitude-behavior gap in CPG
spending
- Demographic factors influence CPG behavior in a downturn
- The active threat of recession-driven behavior varies between CPG
categories
- Recessionary consumers are more likely to alter where they shop before
altering what they shop for
- Key take-outs and implications: various factors influence whether or
when consumers' financial concerns change their consumption behavior
- INSIGHT: Premium CPG spending is relatively resistant to recessionary
pressures
- Post-materialist consumers fuel the premium market with" less but
better" attitudes
- ' Maturialism' : older consumers are increasingly prone to trading up
- Time-poor consumers trade up to premium products and services to save
time
- The premium market may contract, but it is less likely to experience a
revolutionary shift towards trading down
- Premium consumers are unlikely to trade down; mass consumers are less
likely to trade up
- Consumers will sustain premium food spending for longer
- Health will remain a powerful motivator in consumers' decisions to buy
premium
- Ethical products have built-in recession-resistance
- Key take-outs and implications: industry players are advised to
maintain investment in premium products
- Conclusions: good planning and good marketing will help offset any
negative impact associated with consumers' recessionary mindset
- ACTION POINTS
- ACTION: Separate the effects of the economic downturn from pre-existing
consumer trends
- Separate underlying consumer behavior from that supposedly driven by
the downturn
- Identify consumer groups expected to be affected by the downturn and
track whether forecast behavioral changes materialize
- Differentiate between short-term knee-jerk changes in behavior and
longer-term behavioral shifts
- Increase the granularity and frequency of consumer assessments and
improve responsiveness to change
- Recognize the broader competitive (and switching)environment
- ACTION: Strengthen price-point diversity in product portfolios to cater
for consumers who are trading-down
- Don' t try to change what your brand represents through price cuts and
endless promotions
- Focus on value not price (especially if you are an established brand)
as a way to recognize the impact of economic squeeze on target shoppers
- Develop a ' pricing architecture' with a value line,allowing consumers
to trade down within a brand stable
- Explore opportunities to enhance distribution through value channels
- Be prepared to re-align products towards the lower end of the market as
the mid-market becomes an even more precarious place to be
- ACTION: Ensure product price increases are linked to performance benefits
- Excel in the provision of factors associated with the Premium Price
Index (PPI)
- Maximize sensory appeal and benefits
- Appeal to post-materialist consumers innate premium desires and
"less but better" mindset
- Maintain, or even increase, customer service efforts
- Position "package shrink" as "green"or at least
communicate the rationale for adopting this approach
- Pursue opportunities aligned with important consumer trends such as
premiumization, health and wellness and ethical consumerism
- ACTION: Maintain or increase marketing investment to help offset
difficulties of operating in an uncertain economic environment
- Maintain advertising efforts to help maintain differentiation of
branded products
- Maintain a strong focus on innovation and R&D during times of
economic uncertainty
- Use Datamonitor' s strategic reports outlining the key innovation
opportunities that arise from consumer mega-trends
- Explore alternative channels for delivery of marketing messages and
invest in channel marketing tactics and new territories
- ACTION: Examine broader initiatives that can be undertaken to help lower
overall costs for target consumers
- APPENDIX
- Methodology
- Further reading and references
- Ask the analyst
- Datamonitor consulting
- Disclaimer
- List of Figures
- Figure 1: Good value for money has become the most important influence
over grocery store choice globally
- Figure 2: Different age groups' recessionary CPG behaviors will vary
based on their range of needs and exposure to financial pressures
- Figure 3: Key CPG categories face varying levels of risk from changing
consumer attitudes and behaviors
- Figure 4: Larger distribution formats with price competitiveness and
bulk-buying opportunities have enhanced appeal to recessionary consumers
- Figure 5: A number of consumer and economic drivers and inhibitors will
shape premiumization in an uncertain economic environment
- Figure 6: A contraction of the premium market is expected - its extent
will be driven by the duration of the economic uncertainty
- Figure 7: Case Study: Anheuser-Busch has shown beer to be a resilient
market through performance of its low-end brands
- Figure 8: Firms in the middle need to move either up or down-market or
face "death in the middle"
- Figure 9: Manufacturers must excel-more than competitors-in the provision
of factors associated with the PPI in order to justify price increases during
times of recession
- Figure 10: Case study: Diageo has expanded its high-end spirits offerings
into ' discernment territory'
- Figure 11: Consumers will become more savvy to shrinking pack sizes which
makes the ethical stance all the more important
- Figure 12: Case Study: Starbucks boosted customer loyalty and provided
additional savings through free Wi-Fi and reward schemes in 2008
- Figure 13: Case Study: US auto makers appeal to consumers' concerns over
fuel prices with free and subsidized gasoline deals with new vehicle purchases
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