As we approach the holiday season, media will sharpen their focus on the cost of food and carve up all the predictions for food trends for 2023.
It’s a huge challenge for everyone in the value chain to predict what consumers will want to buy in this inflationary period.
Unfortunately, there probably won’t be much room for the other headline: Cost of inputs is #1 issue for Canadian producers and processors. That said, it’s incumbent to be aware of current consumer research and the trends. These factors should impact what you do in your business and how you interact with your customers.
Recently, the Canadian Centre for Food Integrity released its 2022 Public Trust Research Report. The results were tabulated from a representative sample of n=2,918 Canadians aged 18+. The 2022 surveys were conducted online from July 4th–25th via Ipsos Public Affairs. Quotas and weighting were employed to ensure that the sample reflects the overall Canadian population according to census information.
Not surprisingly, the cost of food is the biggest issue for Canadians responding to the survey. We know inflation, interest rates and the economy are in the news on a persistent basis. Consumers are paying higher prices at the grocery check-out.
The responses to two questions illustrate the impact of challenging economic times. The first question was about affordability.
When responding to the statement “I am more concerned about the affordability of healthy food than I was a year ago”, 55 per cent said strongly agree, which is an increase from 42 per cent in 2018. There is no doubt this issue is on consumers’ minds and impacting what they buy. The trend has been increasing and this is a significant shift.
When saving money and the cost of food is on consumers’ minds, they change their buying habits. When consumers were asked to respond to the statement “I do not care where my food was produced if it is affordable, safe and healthy”, 25 per cent said strongly agree compared to 18 per cent in 2018. This could have an impact on the trend of local food. Recently we have seen more demand for local products and retailers have been responding with ‘buy local’ programs. Price could have a negative impact on this trend.
The report includes a wealth of other information for people in the food industry. The trends are valuable as they represent a consumer perspective over a period of time. It is not always advisable to respond to a one-year change, but when we see perceptions continue to change over a number of years, it is a better indicator of a change in beliefs.
What consumer research is telling us
Producers and processors need to plan for the future. Many do not have the luxury of changing plans during the year or even from year to year. They also cannot just ‘do what you always did’ because that might not be relevant.
When we see consumers concerned about the price of food, there are several possibilities:
a). They will trade down in the category. For example, they will buy less expensive cuts of meat or cheaper apples.
b). They will be looking for smaller packages that cost less money. Even if larger packages offer better value, the price point will be more enticing when it is lower.
c). They will shift purchases to private label because they often have lower retail prices for the same size package.
d). They will change store formats. Discount stores will see more traffic as people sacrifice some service or variety for cheaper prices.
e). In produce they will be more likely to consider some of the imperfect offerings, if the price point is lower.
f). They will eat at home more. This is a challenging trend as we saw retail sales soar during the pandemic, then recently reports indicating that food service has rebounded. Now we could see a decrease in food service as it is more expensive to eat outside the home.
g). They will be more disciplined about shopping the ads. There is no doubt grocery store flyers offer savings from regular prices, so the penetration of specials will probably increase.
h). They will load up on in-store specials, multi buys and loyalty program offerings. Any temporary price reduction that delivers value will likely see an increase as consumers look for opportunities to reduce their shopping bill.
i). They will probably go back to the bricks-and-mortar store. Online shopping increased exponentially during the pandemic. Some consumers will be deterred by the extra fees and if they really check, they pay more when they shop online. They buy what they have always bought as opposed to shopping the category and trading off between brands. It is more convenient, but it is more expensive.
Reacting to the information
Producers and processors need to consider the changes coming for consumers and the impact on their business. Every category and every retailer will be impacted differently. Premium items could see a decrease in sales and lower end items might see an increase. If you pack private label, there could be volume increases coming. These are just examples, but the changes could be significant with consumers feeling the pressure of inflation.
Planning is more important than ever. The decisions about what to produce or how much should not be made in isolation. We have shared one report but there are other sources of information available. Build a plan and consult with your customers before you finalize decisions. I am always a fan of taking a plan to a retailer. This is your business, but they have a big impact on it. Build your plan and then discuss your ideas and conclusions with them. They might have some valuable input into product mix or volumes. When they are part of the plan, they are more likely to support it.
Many believed if their business survived the pandemic, it would get easier. The current economic environment will make it more challenging in some respects. It is difficult to get labour, inputs and keep your cost of goods in line. Now you also need to determine if you should reconsider the items you are producing, for which channels and perhaps how much.