Inflation will continue to play a pivotal role over the course of the next year. Grocery inflation started in 2022 at 2.1% and in December 2022 it hit 15.4%. This is driven by a range of factors such as the rising costs of energy, transportation cost, global food prices, Brexit, and staffing costs.
Consumers are changing purchasing habits to adapt to this crisis. Consumers will continue to shop around for the best deals. Loyalty schemes and offers will be essential for retailers to gain footfall. We predict that the following trends will be key for consumers and retailers over the next 12 months. These trends may pose threats/opportunities for business. We have some key recommendations in relation to each trend to help your business become more successful in 2023.
Efficiencies for Retailers to gain value:
Not only has inflation impacted customers, but retailers have been hit with enormous buying price increases, some of which have surpassed retail prices. This will no doubt have affected the bottom-line margin. We expect non-priority projects in retailers to pause and retailers to focus on efficiencies.
We predict retailers will focus on how to gain back on efficiencies in all areas in the business. This could be reducing SKUs to gain in packing efficiencies, more profitable product launches and looking for more automated ways of doing things.
As a food/drink business, awareness of retailer’s needs is essential when presenting new products. Highlighting the key value of your product is important and simple things like ensuring your outer cases are SRPs will influence the retailer’s decisions.
Consumer product preferences:
Customers will have to trade up trade down or trade off on certain products. This means customers could be trading up to more premium range (Deluxe, Specially Selected, Simply Better, Tesco’s finest, Signature SuperValu) to have an occasion at home instead of eating out in restaurants. Certain customers will trade down from premium tier or brands to own brand for better ‘value'. Customers will also be deciding that they can no longer afford an item so the trade off the item.
As a food/drink business you need to understand your products position in the market. You need to be aware of what category your product filters into. Review your overall business strategy, to ensure your customers aren’t continuously trading off your products.
Value Range:
We predict that value range offering will become more evident in retailers. In August 2022, Asda in the UK launched ‘Asda everyday range’ with a range of 300 budget friendly items. The range varies from ambient, fruit and vegetables, fresh, bakery and frozen. We predict that you will start to see this filtering through to Ireland. This will help the price conscious consumers. Another global example is Coles in Australia. They have launched a big value pack range of 44 items at discount prices.
Review your product range and ensure a value range offering is considered as part of your product strategy. This tier is generally retailed at a cheaper price so meticulous costings are essential
Product versatility:
It appears that people have reduced consumption of single use or less versatile products. Consumers will continue to look for products that are more versatile and products that can used for many meal occasions. Chicken is an example of a product that has a grown at +6% - it is very versatile and cheaper than the likes of lamb. Fresh bakery has declined at -16%, this category is seen as single use (Bord Bia’s inflationary impact report 2023).
The right marketing of your product may aid your product versatility. Educating consumers with recipes and tips may guide your product’s perception from ‘a one occasion’ product to a more versatile product.
Sustainability and longer shelf life:
Product sustainability is important to consumers, but consumers are choosing other ways to be sustainable due to price increases. Frozen foods category is growing and 40% of Irish consumers says frozen food has become more important to them over in recent months (Bord Bia’s inflationary impact report 2023). Frozen foods are providing cheaper alternatives than fresh and helping to minimise food waste.
Offering consumers an easy and accessible sustainable product will be essential to drive business forward. Simple things like reviewing the weights of your products and deciding if they can fall into a portion weight will aid food waste. Extending shelf life of products is another area to review.
Local:
Local plays a key role in various product categories. Local meaning: locally sourced ingredients like Irish butter, we predict that this will become even more important with the cost-of-living crisis. Consumers will feel they are supporting their local economy by purchasing products available from the locality.
Consumers are continuing to question where locally products are from. This is filtering through to the packaging of products. In Dunnes Stores for an example a garlic supplier has been named on front of pack. German discounter Netto Marken-Discount has launched a private label locally sourced fruit and vegetable range. The packaging has a QR Code which allows consumers to find out more about the origin of the product (European Supermarket Magazine).
Review your packaging and add the origin of key ingredients where possible. Be creative and innovative to gain attraction and market your USPs where possible.