Rising costs offer unique marketing opportunities

by Editorial Staff
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Consumer concern about rising food and fuel costs is top-of-mind today. As prices rise, there is an enduring trend in American culture that whenever watershed moments occur, both consumers and experts alike feel the need to draw context around the moment by pontificating about what is happening; why or how consumer behavior is changing; and what all of the changes mean. Often lost in the discussion are the opportunities such events offer.

To those who predict major consumer lifestyle changes associated with the rising cost of gasoline, for example — increased carpooling, changing priorities, cancelled vacations, fewer trips to the store, etc. — what the data tell us is consumers, when asked, most often will stress the dramatic impacts events have on their lives, but the singular events will not cause consumers to behave differently.

Today, consumers lead busy and, in many ways, frenetic lives. Because of rising food and gas prices consumers may feel differently and they may think differently. They may even feel a need to feel like they should behave or act differently. But at the end of the day, life for most consumers continues in remarkably the same manner as it did prior to the price hikes.

As food prices rise at the local grocery store, most analysts are spending a significant amount of energy commenting on the obvious consequences on the consumer front: eating more at home, basing purchasing decision on price, and shopping discount food retailers more than usual.

While food manufacturers are scrambling in an economic environment where private label only will capture more near-term market share, we believe they should focus on the unique opportunity staring retailers in the eyes: prepared foods.

Evidence is starting to appear that consumers are and will be reducing the amount of restaurant visits they make each month as one of their primary methods of cutting back on spending. What’s really happening when consumers do this, though, is simply a shift of food dollars from a symbolically "unnecessary" category of expense to a category of expense that is almost impervious to recession or even depression — groceries.

Our examination of food and restaurant culture over the years has revealed that convenience-oriented restaurant trips are the most susceptible to economic fluctuations, because consumers feel they are wasting cash to avoid cooking, when the meals they buy at mid-scale, convenience oriented restaurants isn’t that much better than home-cooked meals. But, more critically, such a shift in food spending does not dampen the American desire to avoid cooking on certain dinner occasions.

This leads us to the one grocery department that offers consumers a restaurant equivalent: prepared foods.

Not only do we believe today’s rising grocery prices will lead to increased grocery sales, but we also see an intriguing opportunity for prepared foods in which manufacturers and retailers aggressively present the items as the "discount restaurant meal," allowing consumers a symbolic means to replace convenience-oriented restaurant trips they used to make once or twice a week with hot fresh fare from their local grocer.

If properly marketed, the effort may temporarily upend the normal framing of prepared foods as an expensive alternative to cooking from scratch with grocery pantry items. The question is not whether a grocery store may offer better food than some restaurants, we know it could be positioned as better quality, but will the grocery store meet the marketing challenges of understanding and meeting the cultural shift in consumer behavior?

Since the ways consumers work, raise children, play, seek out new taste experiences and grow old are all undergoing rapid changes, the everyday culture of food also is shifting. This is why, even in the face of rising food and gas prices, American consumers will not abandon their interest in, or pursuit of, higher quality foods and food experiences — the behavior is ingrained in American food culture. The lesson is that to weather tough times one needs to understand consumers’ actual behavior — not anecdotal responses to questions from the media or answers to survey questions. FBN

Laurie Demeritt is president and chief operating officer of The Hartman Group, Inc., a consulting and consumer insights firm specializing in the analysis and interpretation of consumer lifestyles, and how these lifestyles affect the purchase and use of today’s products and services in tomorrow’s marketplace. Laurie may be reached at FBNEditor@sosland.com.

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