First up we were treated to ‘The Big Picture Outlook’ exploring a fascinating snapshot of the UK economy, from growth in interest rates to inflation and how this ultimately shapes shopper behaviour, backed up by key drivers for change and the trends for the year ahead.
One thing is clear – cost of living and inflation is still front-of-mind for most of us, and while the country is currently in a technical recession, there is some good news to be found if you look hard enough! According to IGD the value of inflation has been trending downwards since August 2022, currently sitting at 3.4%. Alongside this the nature of inflation is changing – energy bills are coming down, but services have become a much more prominent driver. As employers try to keep up with the cost-of-living and compensate with high wage growth – including an increase to the National Living Wage of 10% – the team expect to see an impact on consumers via price increases, with the foodservice market likely most impacted and passing on costs. Attributed to the cost-of-living crisis, households could be spending £5,392 more than in 2021 on housing, energy, food, but overall, analysts predict that interest base rates could fall soon, if inflation remains under control.
When it comes to available discretionary spend, 27% of those on lower incomes are said to be focussing their efforts on repaying debts, which is having an impact on food and grocery spend. This group are cutting back already, or planning to spend less, on items like clothing and eating out. IGD anticipates that in 2024 growth in eating out will primarily be driven by price increases, offset by less visits and consumer ‘downtrading’. But what about spend on food and grocery shopping? Overall, 40% of consumers plan to buy less, meaning fewer items in their basket in the next few months, increasing to 46% for lower income households. Here we will see the emergence and adoption of savvy shopping tactics, with people shopping for promotions (65%), sticking to a budget more (60%), buying more private label / using more loyalty cards (59%) and shopping around more (43%).
With continued geo-political tension, general labour market pressures and an upcoming General Election there is a lot of uncertainty in the UK. Reform is likely to mean focusing on the country’s economic strengths, such as technology and services, while building future sustainability and resilience. It is predicted that UK food prices will stabilise at or near the current level (at +30% up over the last years). Shopper trust in the food industry to keep prices down has eroded in recent years, but data does show that shopper confidence is picking up… we’re not out of the woods yet, but it’s heading in the right direction – helped by a busy Christmas for UK food retailers when looking at product quality vs price.
It's perhaps unsurprising to hear that the economic shocks of the last few years have also impacted the way that shoppers approach ethics – it’s not that they no longer have an interest in where their products come from or how they are produced, but inflation has impacted engagement with environmental issues and interest in supporting British producers, while animal welfare has been affected much less. This doesn’t mean interest won’t return, and they will expect the work to have been done by brands in the meantime!
With population growth set to test resilience in the future - the latest projection showing the population will grow by another 6% in the next 10 years (by 4m people) - experts say this really sums up the key challenge of the UK food chain. We have to feed the people we have now, while improving sustainability and resilience, and finding ways to feed more people… and fast!
Looking to the future, eating in will maintain its elevated share of total consumption, an impact of the post Covid era, as people weather the storm, make compromises, and cut back. While all channels, in and out of home, are expected to see growth over the next five years – consumers are reprioritising; 56% claim to be eating out less, 50% ordering fewer takeaways and 28% are organising fewer nights in.
Here there are opportunities for all to capitalise on the savvy shopping tactics noted earlier – creating a new ‘eating out at home’ trend, expected to build in 2024. We are already seeing more brands focussing on the summer of sport and this will only grow as the Euros and Olympics approach, and retailers will continue to build private label lines to make the most of downtrading opportunities previously held by brands around special occasions – a nod to 36% of shoppers claiming to be buying less well-known brands this year.
But is it game over for brands?
In short, no. Expect to see more brand partnerships and retail media as 55% of shoppers claim to be buying the same amount of well-known brands in the last year. Brands are going to have to work hard for their share, drawing shoppers in by communicating their heritage and demonstrable product quality. We’re already seeing this in-store as retail media opportunities increase with new technology like in-store moving ads, and advertising on scan as you shop devices.
IGD also reports an evolution of multichannel shopping. This trend builds on the cost-of-living habits we’ve adopted to secure the best prices i.e. visiting discounters/more than one store, and the companies that make this easy will win spend going forward. While 96% of shoppers already have at least one loyalty card, there’s more to come here as retailers vie for market share. Expect to see these schemes adapt to ‘reward loyalty’ with significant money savings, price matching – and essentially encouraging ‘reward hunters’ rather than securing absolute loyalty.
It’s safe to say that currently the power remains with the shopper. With new and growing players in convenience, and the continuing battle between discounters and the big four, the race is on, with more evolutions in multichannel shopping to come. We’ve already seen larger grocery retailers targeting convenience and specific shopping occasions – a good example of this is ASDA and Morrisons which have converted hundreds of convenience stores and forecourts and will be adding more to their portfolios as they look to increase revenue, and Sainsbury’s is changing its convenience ranging to better target on the go shopping occasions. But larger stores aren’t going to give up shoppers easily. The Big Basket shop will become the battleground as retailers fight back against discounters by expanding their offering, including EV Charging at Sainsbury’s and collecting IKEA orders at Tesco.
And for longer-term issues, shoppers will look to industry to lead on healthy consumption and sustainability. Regardless of current attitudes, retailers are moving ahead with their sustainability ambitions and packaging pledges, reducing private label plastic packaging and experimenting with ‘UK firsts’ – which in turn will put pressure on branded products to react.
The consumer perspective: mission and perceptions
After looking at the big picture, what does it all really mean for consumers? It’s clear that over the last few years, shoppers have faced a huge amount of change, and we know that eating in is retaining share, so there are plenty of opportunities for businesses and brands to explore to meet this need. To this end, IGD is keeping ahead of the curve to continue to be ‘the best voice of the shopper’ through its ShopperVista service.
When it comes to ‘shopper missions’ IGD has identified a number of key reasons for why we visit stores, and generally speaking, we’re visiting up to 12 different retailers each month to complete our shopping missions. But not all missions are completed in one-store, very few in fact.
The key missions are broken down as:
- Main shop – 1.6 average number of stores visited to fulfil mission
- Food-for-now – 1.8
- Specific journey – 1.1
- Top up shop – 1.3
- Food-for-later 1.9
- Other in-store services
As shoppers, we’re becoming savvier, breaking down our overall missions into smaller, sub-missions and using retailers in combination to find where best meets our needs. 52% of us change retailer choice based on what we’re buying. This could mean going to one store for certain products like fresh produce, and another for cleaning products. And of course, we’re also swayable at shelf – 55% of shoppers make a final decision once in-store or online – think instore promotions, shelf wobblers, gondola ends, they all have a subconscious impact and play a role in influencing the final decision-making process.
Here, there is no sense of loyalty – we see it seasonally, at Christmas in particular, where retailers demonstrate their strengths and communicate strong performing product lines. And for suppliers this is increasingly important to understand the strengths of each retailer and ensuring products fit those and are in good supply.
Finally, we saw that shopper missions and ‘special’ occasions are interlinked. There’s a significant opportunity for retailers to compete with foodservice here (you can check out our foodservice seminar notes here) as consumers seek out in-home alternatives to suit their needs, be it hosting sport screenings or recreating movie night with friends and family.
But what makes an occasion?
For retailers and manufacturers, occasions are often seen as functional, but consumers apply a much higher level of emotional purpose here. They don’t see everyday meals as ‘occasions’ but instead include special elements, viewed often as events like birthdays or Christmas.
Most occasions (93%) take place at home, are functional and happen fairly routinely, but this doesn’t mean there aren’t opportunities for influence – take for example our latest blog on what apps like Cherrypick tell us about the future of grocery shopping. For everyday routines 68% of occasions that take place in-home are everyday occurrences, and 40% of them happen alone, so there’s an opportunity to inspire shoppers to elevate their occasions into something a bit more special, to explore nearby categories, or encourage them to trade up – and for specific products, to drive store choice. For example, 57% of consumers said that if stores where in more convenient locations, had specific items I can’t get anywhere else (20%), or there was a special offer (10%) it would encourage them to visit – while 14% make a trip for a special occasion.
As ever, these seminars were packed with hugely insightful information, food for thought and a real look to the past, current and future. It will be really interesting to see the trends and predictions play out in retail over the next year as retailers and brands go head-to-head to secure spend. The winners and losers remain to be seen, but expect some big changes to play out around the General Election, inevitable media scares around Ultra Processed Foods, and product availability affecting the long-term. One thing is for sure, the food industry never fails to fascinate us. We’ll be watching!
