Ahead of its latest biannual ‘FMCG Demand Signals’ report which covers Total Store Data, Circana (formerly IRI and The NPD Group), has today revealed softening of demand in unit sales across the six largest markets in Europe (France, Italy, Germany, Spain, UK and Netherlands) – a decline of -1.1% on an annual basis, deepening further by -1.4% in Q4 2022. This is the fifth consecutive quarter of decline and is not forecast to return to normalcy until the end of 2023.
Forensically unpacking the impact of the pandemic, inflation and the cost of living crisis on over 230 FMCG categories, 2000+ product segments and over a 10 million SKUs, the report also flags the rise of the ‘prosumer’ – a more price-aware, savvy and forward-looking consumer looking to adapt what they buy and how they consume to moderate the impact of intense price rises on their wallets. As such, Circana are heralding the end of the ‘destination shop’ as shoppers buy less to moderate the continued impact of price increases in their grocery shop.
With the energy crisis continuing to impact the household purse, plus the impact of the entrenched war in Ukraine impacting supply chains and the cost of ingredients and shortages, shoppers are still adapting how they buy and use everyday products.
Ananda Roy, global SVP, strategic growth insights, Circana, commented: “This decline in unit sales is the clearest indication yet that demand is dragging across the largest European FMCG markets. We’re forecasting unit demand to decline sharply in Food Staples where price inflation continues to be the most intense.
“What is now becoming a ‘standard-of-living crisis is requiring shoppers to change how they try, buy and use everyday items. In fact, a staggering 86% of European shoppers have reported changes to their ability to buy and willingness to pay being stretched. As a result, many are having to adopt a strategic approach to their shopping – making tough decisions and only based on needs. They are no longer sleep walking into the store and getting their heads turned by impulse buys and clever marketing promotions.
“Sadly, an increasing number of shoppers are having to strip what they buy back to an almost quasi-Dickensian existence – looking for yellow-stickered items, even if they’re out of date, increasing the use of food banks, and reports of an increase in shoplifting amongst all major retailers.
“However, retailers have stepped in by increasing targeted promotions through loyalty cards, ‘price locks’ and price matching across retailers, and keeping between 500 to a 1000 items priced as low as possible whilst also encouraging the use of scan-as-you-shop devices.”
Key European highlights:
- Overall growth driven by inflation. The FMCG category grew 5.8% in 2022 across Europe, adding €33bn in value sales vs. 2021. However, during the last 13 weeks of 2022, value sales increased by +10.1% as a direct result of record inflation.
- Growth across categories except alcohol. Chilled & Fresh, Ambient foods, Beverages & Personal Care fuelled 2022 category growth, but a -3.4% decline in alcohol sales marginally offset gains. This can be partly explained by a return to normalcy after a surge in demand during the pandemic. This also demonstrates how consumption patterns are changing with fewer consumption moments, less alcohol consumed at each sitting and changes in the segment mix with growth in Ready-To-Drink spirits and Low/Zero alcohol beers and spirits not fully offsetting the overall decline in demand.
Consumer behaviour insights across the six largest markets in Europe and the USA, Australia, New Zealand, Brazil, Turkey, UAE:
- The ability to buy and willingness to pay has been stretched. Only 14% of consumers have made no changes, while 39% are now relying on personal savings and loans to pay bills.
- Witnessing the end of the destination shop. 29% of consumers will now change where they buy everyday products to get a good deal, while 26% will go to another shop if their regular brand is not available or not on deal (34%), or if there are not enough deals across their weekly basket (41%). However, retailers are working hard to address the potential fall in penetration and footfall by expanding their loyalty card promotions and providing price locks and discounts on a range of consumer basket items.
- Shoppers are moderating the impact of price increases. 22% are making fewer trips and 32% are planning ahead. 18% now plan how much to spend to reduce impulse purchases and use scan-as-you shop devices and online grocery websites to avoid embarrassment at the till.
- Changing in-store behaviour. 59% of shoppers are comparing prices, 49% are comparing how much to use, and 44% are on the hunt for crossed-out yellow-stickered products even if they’re out of date. 29% are looking for sustainable products and 39% are reading packaging labels or independent reviews (23%).
- Emergence of new consumption occasions and moments for everyday products. One-in-four shoppers (27%) are changing what they shop for based on changed consumption behaviours such as eating in or making a packed lunch to take to work. This is creating opportunities for innovation in product experience, portion and packaging design; and as such, retailers are expanding their ranges to meet new demands in these food segments.
- Shoppers are still trying new brands. First choice trial drivers include good price (63%), followed by being on a deal (40%) and good availability (40%). Being innovative, sustainable, of good quality, being plant-based or good for the environment are deal breakers, but not trial drivers.
Roy concluded: “With reduced demand and lower shopper confidence, retailers are having to optimise their ranges to maintain the availability of core items. They’re also price locking staples to support customers, which is leading to a stealth price war. Rationalisation is taking place across all categories except for Chilled & Fresh & Confectionery, and we’re expecting to see the gradual return of Every Day Value Pricing as retailers are finding promotions less effective. It’s a good time to be removing the bad deals and fine-tuning target audiences to better support them.”
The full report will launch on 10 May 2023.
