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Cost of Living Crisis

The £1.19 cheeseburger

For 14 years McDonalds have kept their standard cheeseburger at 99p, somehow £1.19, doesn’t sound quite the same…Two pints of milk are now selling at the same price that 4 pints of milk were selling at the start of the year. UK inflation is soaring & retail is facing the consequences under the consistent inflationary pressure.

IDG estimates that UK food inflation will rise to 15% over the summer; Citi Bank go further, suggesting a higher rise, 20+%, as we move into 2023 (Grocer). Mintel research shows that 28% of consumers say their personal finances are “tight, struggling, or in trouble” right now & have suggested that customers are spending less on their food shop due to the rising prices. Supermarkets Asda & Tesco have told the BBC News that ‘customers are cutting back on shopping’. Asda going on to say that some shoppers are asking cashiers to stop scanning items when their till total hits £30 as they try to cut costs. What is inevitable is that the ongoing COLC is not looking likely to improve in the short to mid-term. Consumer confidence is low with the continuous battle of price increases; changes in behaviour patterns are starting to show: 46% state they are changing habits, 24% are trading down, over 30% buying less meat, 19% less fruit & vegetables. (YouGov poll commissioned by Red Tractor).

June 2022 saw the eighth consecutive month in a row that the UK’s household disposable income fell, the average family having just £200 per week left after paying tax & essential bills last month (Asda Tracker). Spend is focused on food & other essentials, with notable decreases in sales of higher margin general merchandise. Sales of frozen foods are increasing, a category which historically performs well in difficult times. Consumer trust in UK food is in decline: the perception that value ranges are produced to lower standards, both food safety & animal welfare. Confidence & trust in multiples is declining, as shoppers switch to discounters to make their money go further.

The Battle for shoppers

Consumers are trading down, across the board, without embarrassment: switching from traditional supermarkets to discounters, from premium to budget ranges & from branded to private label products. The low-cost chains have been steadily improving their offer over recent years & are now reaping reward via customer gains, especially so as they increasingly grow their grocery offers. Value retail, NeilsonIQ tells us, now accounts for 24% of UK grocery sales, with one in four households monitoring the overall cost of their shopping basket. Consumers are seeking their favourite brands from value retailers like Poundland & Home Bargains. Mintel states that ‘the associated stigma of shopping at discounters has gone’, as 95% of all shoppers saying they now shop, to some degree, at a discounter.

 

In response Poundland have recently stated that they are increasing the percentage of products that they sell at £1 to 60%, +10%, as they see shoppers looking to make savings. They are also extending their frozen offering: ‘we know how important chilled & frozen food is to our customers as they seek to manage their spending, making sure everything they buy gets eaten with as little wastage as possible’ A Cooke, Poundland Retail & Transformation director. B&M Bargains tell us that their basket of food (& other essential FMCG items) can be up to 15% cheaper than supermarket competitors when comparing with the Tesco Clubcard & Aldi Price Match schemes; with a business model that is essentially ‘stack them high, sell them cheap’, & few items in store priced above £20, they can offer a distinct advantage as consumers tighten belts. Both Home Bargains & The Range are looking to significantly expand store numbers over the coming months.

The Supermarket Fight Back

As shoppers increasingly show their distrust in the multiples resulting in a growing loss of market share, the major supermarkets, including the ‘Big 4’, (with its own changes as Aldi pushes above Morrisons) are clearly worried & looking to fight back.

Facing some of the toughest economic conditions in decades, they are supporting customers where they can with a raft of new pricing strategies. They are cutting product ranges, searching for cost savings, monitoring competitors as they try to stay one step ahead. Although able to use their sheer size & subsequent economies of scale to keep prices as low as possible we are also seeing a number of initiatives aiming to incentivise customers & retain their  loyalty including the majority signing  up to the Government’s ‘Help for Households’ (HfH) campaign.aiming to incentivise customers & retain their  loyalty including the majority signing  up to the Government’s ‘Help for Households’ (HfH) campaign.

Tesco

The Tesco Clubcard scheme is at the heart of their strategy; held by more than 20 million households, with 8.5 million using the app, as well as retrieving essential data to support future intelligence the Clubcard offers a very real money saving loyalty scheme. ‘Crucially compared to many other loyalty schemes it’s really easy for shoppers, you don’t have to do anything, you get the great price just by turning up with your Clubcard’ Fraser McKevitt, Kantar’s head of retail & consumer insight. Clubcard holders pay up to a half less than non-holders across some 3,000 products, in-store & online, it also complements their ‘Everyday Low Prices’ strategy on more than 1,600 items. Current Clubcard price top picks include £1 for a twin pack of McVitie’s Jaffa Cakes versus £1.6 for those without, £10 pounds for a 20 bottle pack of Coors beers versus £14, half price on a pack of nine strawberry yoghurt Frubes.

Other initiatives include ‘save save’, for example by removing plastic wrap from own brand multipack drinks they are reducing their own packaging costs & selling on to the consumer at the same multipack price but allowing shoppers to ‘pick n mix’ their favourites. They also promise both an Aldi price match & are battling an online Amazon price match.

As part of the HfH campaign with an adult minimum purchase of 60p they offer free kids meals in all cafes from 25th July – 26th August.

Sainsbury

Have brought back the ‘feed your family for under a fiver’ campaign. https://www.sainsburys.co.uk/gol-ui/recipes/scrapbooks/feed-your-family-for-a-fiver with recipes as diverse as Thai vegetable curry, beef kebabs & creamy porcini spaghetti. Allowing for a family of four adults to eat well with a price promise of up to three weeks. They have also Aldi Price Matched on 150 fresh own-label & branded products plus other grocery & frozen products in our larger stores.

Both Aldi & Sainsbury’s have also signed up to the ‘Scotland Loves Local Gift Card’ initiative with more than 100 Aldi & 70 Sainsbury stores accepting this as a method of payment (M&S & Spar also involved.) The gift card is designed to ‘lock money into local economies’ & can be used for purchases of Scottish made products.

As part of the HfH campaign they have extended their £1 kids’ café meals offer, with no minimum adult spend, until the end of the year. Other initiatives include the ‘Asda’s Essential Living Hub’ with advice for parents struggling through the summer months.

Asda

In May Asda introduced the ‘Just Essentials’,replacing the existing ‘Smart Price’ budget range, covering essential household items including groceries: fresh meat, fish & poultry, frozen items & cupboard staples, aiming to strengthen their position as the cheapest of the UK’s four biggest grocers. They also launched a ‘drop & lock’ promise on over 100 family favourites through until the end of 2022; On average, prices fell by 12%. including staples such as John West tuna, dropping by 14% from £3.50 to £3, & 500g of Asda easy cook rice which has dropped by 25% down to 75p from £1. They went on to initiate a price matching scheme with Home Bargains – vowing to meet the low prices.

As part of the HfH campaign they have extended their £1 kids’ café meals offer, with no minimum adult spend, until the end of the year. Other initiatives include the ‘Asda’s Essential Living Hub’ with advice for parents struggling through the summer months.

M&S

Are pushing their ‘Remarkable Value’ campaign: ‘M&S quality, everyday low prices. From free-range British eggs to Italian pasta, discover everyday low prices on the things you buy most at your local M&S, all with the highest quality and standards you’d expect from us. Because this is not just value. This is Remarksable Value’. They have signed up Michelin-starred chef Tom Kerridge to create a Remarksable Value meal planner,, with recipes all costing under £2 per person per meal, giving shopping lists, a meal planner & recipes, everything you need to shop for & cook five tasty midweek dinners for a family of four, plus tips for leftovers & a promise that ingredient prices will be locked for the rest of the summer. Recipe ideas include: roasted cauliflower & cumin fritters with cucumber & yoghurt dip; Stacked bacon, egg & charred tomato sandwiches with spicy potato wedges & chipotle chicken thighs with herby rice.

Convenience stores

The COLC has seen a higher penetration for convenience stores, however frequency, spend & basket size have all fallen as consumers head across to the discounters to seek out bargains or alternative products completely. They are also using ‘bundles’ as an offer to purchase specific meal items at lower costs.

Co-op

Have announced they will be  ‘simplifying’ their product range in an effort to reduce costs, & ‘drive more accurate replenishment’ as empty shelves become increasingly common in stores, but promise to continue & develop their products.

Deal hunters have posted across social media sharing offers, last week they were running an offer that included Birds Eye Southern Fried Chicken Grills with mixed vegetables and Alphabites, along with Viennetta or Carte D’or vanilla ice cream. Buying this bundle costs £, buying the items individually £12.25.

Heron Food

Are marketing low price bundles: £5 to serve 4 for breakfast, the bundle includes orange juice, hash browns, Richmond sausages, Warburtons muffins, beef patties, & eggs & a ‘frozen meal deal for just £3 with Goodfellas pizza, crinkle cut fries & ice pops.

smaller business often enjoy support as communities look to support ‘shop local’ & independents, offering high standards, something a little different, more of a shopping ‘experience…building trust with the consumer as they lose it with the multiples…

One Stop

With over 900 shops, they have announced a summer campaign in partnership with Fareshare to donate profits from sales of a summer holiday activity book along with a further donation for every piece or multipack of fresh fruit & vegetables sold.

Online

Amazon, July 18th ‘seeking an edge amid a deteriorating cost of living crisis, will match UK grocery market leader Tesco’s prices on hundreds of products. Amazon Fresh, delivering groceries to Amazon Prime members, will match its prices to Tesco Clubcard deals on everyday items, including meat & fish.

Approved Foods – short dated & surplus stock, sold online along with the likes of @Motatos.co.uk ‘sustainable & affordable groceries’ up to 60% off, celebrity endorsement from Gemma Collins, selling over production, short dates, faulty packaging & out of season products. Deals from brands such as Huel, (Image), their current offer includes a ‘healthy breakfast’, working out at £1.51 per meal with the ‘perfect blend of protein, carbs, fat & fibre, plus 26 essential vitamins & minerals. Huel’s promise is to ‘make nutritionally complete, convenient, affordable food with minimal impact on animals & the environment.

Subscription

Gousto have collaborated previously with the Trussell Trust donating thousands of meals to their food bank network; they are now piloting a test to update emergency food parcels into healthy recipe meal kits, designed by their in-house nutritionist, all recipes include at least two of your 5-a-day & can be prepared within 30 minutes, without the use of an oven, saving on energy costs. Dishes include fruity Moroccan style chickpea stew with couscous & three-veg miso & sesame ramen with egg.

The Shrinkflation Phenomenon

Retailers are looking at all options beyond price rises including cutting down on the number of promotions, reducing levels of discount, shifting away from offers of three items for the price of two to four for the price of three. The ‘Big 4’ have all recently cut weight off  own-brand dishes, yet, in some cases still increasing the price.Tesco cut 50g off the weight of all its own-label ready meals, however some still saw an increased price. Research by The Grocer using Assosia data reveals the brand has changed its 450g & 800g ready meals to 400g & 750g respectively alongside upping prices in some cases: 450g Sweet Potato Red Thai Curry & Jasmine Rice decreased to 400g, but increased its price point from £2.75 to £2.80. Morrisons have also shrunk its range of 450g Indian-inspired curries with rice: Chicken Jalfrezi with Basmati Rice, Chicken Korma with Pilau Rice & Chicken Tikka Masala with Pilau Rice to 400g.

Branded goods often have emotive decisions for purchase, however with consumers turning to own label products to make savings, brands are focusing on retaining consumers who are looking to cut costs. With the fast & fluctuating increases in costs of procuring raw materials brands are focusing on reducing package size rather than increasing price. This has been happening for a while, who remembers the horror of only finding 10 Jaffa cakes in the standard box instead of 12? Pre-covid, 2019, still in therapy! However, once a product has transgressed from manufacturer to retailer the price point is down to the digression of the retailer, the manufacturer can only suggest the RRP. Take Unilever for example: their popular Magnum ice cream four pack 110ml sticks, have seen a reduction to just 100ml each, originally priced at £3 but have been seen retailing at a higher price: Tesco at £3.25 & Morrisons at £3.20.

 

Other examples include Walkers, which cut two bags of crisps from its 24-bag multipacks while the price stayed at £3.50. Smith’s Frazzles & Chipsticks now sell in a pack of six bags instead of eight for £1. Bags of KP peanuts are now 225g instead of 250g for £2.50. Recently, Mars cut the size of its Maltesers sharing bags & Twix multipacks due to the ‘rising costs of raw materials and operations’. Upfield also blamed ‘significant commodity cost increases’ for slimming down packs of Flora, Bertolli & I Can’t Believe It’s Not Butter.

Downsizing has also hit fast-food chains: Domino’s has cut down the number of boneless wings in an order from ten to eight, citing “unprecedented ingredient costs.” Burger King is doing the same with its chicken nuggets. (Bloomberg)

A One Poll survey as reported in the Mirror surveyed shoppers on shrinkflation, 45% stating they would prefer a reduced pack size over a price increase if changes had to be made. 55% said they were most disappointed by the decrease in chocolate sizes, followed by crisps at 44%. IDG go on to state that higher affluence groups were more accepting of increased prices, whereas lower affluence groups would prefer to have a smaller pack size to keep the price the same. Similarly, the more affluent shopper is more likely to agree that they would prefer ingredients to be the same quality & pay a bit more.

Is your business struggling to innovate with the current inflation & COLC? We can provide management of innovation activity through to consumer feedback within stressed economic conditions to ensure market research sits at the heart of your PD teams.
Shrinkflation – The Numbers…

Quality Street – weighed 1200g in 2009 now 650g

Tin of Roses – weighed 1100g in 2009 now 600g

Mars Bar – reduced from 62.5g to 58g then to 51g

Bag of Maltesers – shrunk from 121g to 93g

Crème Egg – pack of 5 instead of 6

Jaffa cakes – packet cut by 12 to 10

Cadbury Heroes tub – gone from 660g to 600g

Cadbury’s multipacks – bars reduced so all are under 200 calories

Toblerone bar – reduced bar size from 400g to 360g

Terry’s Chocolate Orange – reduced from 175g to 157g

Birds Eye fish fingers – cut pack from 12 to 10

Dorito’s sharing bag – reduced from 200g to 180g

Cadbury’s mini rolls – sold in packs of 10 not 12

Andrex toilet rolls – reduced each roll by 21 sheets

Aero mint – reduced from 120g to 100g

M&Ms family bag – shrunk from 165g to 140g

Sensodyne Toothpaste – 100ml to 75ml

Philadelphia – shrank from 200g to 180g

Hovis bread – 800g to 750g

Box of PG tea bags – reduced from 250g to 232g

Tetley tea bags – sold in packs of 88 not 100

Coco Pops – large box reduced from 800g to 720g, small 550g to 510g

Tropicana juice – reduced from 1.75L to 1.6L

Surf washing powder – does 23 washes instead of 25

Colman’s tartare sauce – reduced from 250ml to 150ml

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