Rising Food Costs: How Can the Consumer-Packaged Goods Industry Support Consumers?
Canadians across the country are feeling the financial pinch when heading out for groceries. Food prices are rising, and it’s tied to ongoing inflation.
According to Statistics Canada’s Consumer Price Index report, Canadians paid 9.7% more for food in April 2022 compared to April 2021. Research from Caddle adds that inflation is driving shifts in consumer purchasing behaviour, including looking for lower-cost and discount brands, buying in bulk or smaller packaging and buying less frequently.
Grocery stores are impacted by these changing shopping behaviours as consumers pivot to more deals and less quantity.
How can grocers and consumer-packaged goods (CPG) brands add value to consumers so they can weather the surge in food costs? Here are two approaches:- Work on brand and product positioning
- Focus on other areas to better serve consumers
The latest CPG data trends shed light on these solutions by highlighting an understanding of consumer needs and identifying opportunities to engage with them.
Identifying consumer sensitivity to adjust positioning and communications
The effects of rising food prices vary across different consumer groups – different groups of people feel the pressures differently. It’s important to position marketing messages and communications that are relevant to the right people based on localized data.
These data are useful for planning where to place in-store banners and discount signage. And, beyond knowing which locales and stores are impacted, the data can drive strategy around product placement in select food categories and store aisles.
And knowing what the consumers’ sensitivities are and where they’re happening can help grocers and brands customize their offers, find opportunities for creating loyalty points programs and plan cross-promotions for related or similar products.
Using data from EA’s Financial Vulnerability Index (FVI) through the lens of PRIZM® Segmentation, we see two groups in Canada that are feeling the effects of rising food prices the most:
It is important for brands and grocers to understand and know how to speak to these consumers, ensuring the tone and messages are fit for both what they need and what they care about most when trying to put food on the table.
Shifting the focus to other areas and innovating to better serve consumers
Data show that consumers affected by rising food costs have less money for discretionary spending. This means brands and retailers should expect fewer sales in some areas, and work on alternative solutions and products to better serve consumers and what they need right now.
It’s about meeting consumers where they are – and the data are pointing to familiar money-saving techniques: buying less quantity or gravitating to products in smaller packaging.
The Lower-Income group above has discretionary income* that is 40% less than the Canadian average. Meanwhile, the Middle-Income, Highly-Leveraged group has discretionary income closer to the Canadian average.
Using ShopperChoice, we go deeper into where and how these consumer groups – and the rest of Canadians – are spending money.
For Canada**, the top things to do to spend less on groceries include:
- Stocking up on items that are on sale (55%)
- Only buying items when on sale (48%)
- Buying larger sizes for better value (38%)
But, for Group 1 - Lower-Income, they:
- Only buy essentials (13% more likely)
- Buy less-expensive name brand products (10% more likely)
And for Group 2 - Middle-Income, Highly-Leveraged, they:
- Price match or ad match to get lower prices at participating retailers (20% more likely)
- Shop more at discount retailers (11% more likely)
- Shop at stores closer to home or work to save on gas (11% more likely)
- Shop more online (21% more likely)
Putting things into further perspective, using ShopperChoice, we know that meal kits and on-product recipes are a viable option to help consumers save money at the grocery checkout. They are convenient, and control quantity and packaging.
Retailers’ prepared meal solutions are worthy competitors to online meal subscription services, and they are one of several innovative ways the CPG industry can support consumers during times of financial volatility.
Like most things, this period of high inflation will pass. Now is a time for CPG brands and retailers to strengthen consumer trust and loyalty, leveraging available data to inform which product formats resonate best and how to communicate to consumers about them.
Knowing and paying attention to the signs are key: grocers and brands need to know what consumers are experiencing, how they think and how they are reacting to food prices.
Learn more about how we help the CPG industry or reach out to Joshua Levi to see how you can leverage data and analytics for success.
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* Discretionary income is the money left over from post-tax income after paying for necessary expenses like rent, utilities and food. It's what is used to buy nonessentials (also known as discretionary expenses) throughout the month.
** Percentages shown for Canada spending behaviours are the percentage of Canadians surveyed from the ShopperChoice database source, Nielsen.