Thrifty consumers dominate

by Allison Gibeson
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Many consumers have re-learned to be thrifty in the current economic climate, and this desire to save money is likely to continue beyond the recession, according to new research from The NPD Group, Port Washington, N.Y.

“There are encouraging signs that the economy may be heading for recovery, but according to our findings, consumers, especially those with lower incomes, continue to struggle,” said Dori Hickey, director of product development at NPD and author of the “What’s Next on the Road to Recovery” report. “Most consumers have unquestionably felt the sting of tough economic times and have cut back on spending and adopted thriftier behaviors; behaviors that may become entrenched the longer the recession continues. Our findings suggest we may be looking at a new ‘normal.’”

Specifically, nearly one in five consumers expects to be worse off 12 months from now than they are today, and half of all consumers expect their financial situation to be the same as it is today. Nine out of 10 consumers said they will plan to watch their spending on food and beverages outside the home going forward.

Overall, consumers are looking to spend less on groceries over the next six months, and they plan to do this by using coupons, stocking up on products when they are on sale, looking at store circulars for low prices, buying less expensive brands and searching for manufacturer coupons on-line. These are also the strategies consumers have used to get by during the recession.

The NPD Group asked consumers if they are still going to use these methods during the next six months, and the answer was yes.

“Consumers are saying they are going to continue many of the strategies they have used during the recession,” Ms. Hickey said.

Ms. Hickey said the behaviors are strategies that have always been around, and when times became tough consumers began increasing the use of these methods.

“Many people who hadn’t been accustomed to using some of these practices on a regular basis have had to revert to them,” Ms. Hickey said. “We’ve revisited some of the ways we’ve all had to use to economize.”

While consumers are saying they are using leftovers more often or are preparing more dishes that are intended to have leftovers, this behavior hasn’t necessarily taken hold and there is a disconnect in this area between what people say they would like to do and what they are actually doing, Ms. Hickey said.

NPD also found a disconnect when it comes to brown-bagging as consumers have said they are doing this more, but the research found this behavior hasn’t changed much. However, NPD has found there is not a disconnect when it comes to consumers eating less at restaurants — consumers say they have meant to spend less at restaurants and eat more at home, and they have.

Other points the NPD Group found consumers say they will continue or do more of during the next six months include planning food and beverage purchases before shopping, using canned foods, serving less expensive cuts of meat, preparing and eating higher priced and quality meals at home, and using frozen dinners and entrees other than frozen meal options.

Ms. Hickey said what she calls the “new normal” is being brought on by fear, skepticism and lack of trust in government policies and business practices.

She said food and beverage manufacturers are aware and attune to the financial situation of consumers and are looking for ways to contain prices as a result. Downsizing pack sizes is one way companies are doing this.

Branded products have taken a hit during the recession as some consumers have moved to private label more. In that sense, there has been more pressure on food manufacturers to contain price in order to compete with private label products. Ms. Hickey said branded manufacturers need to look for ways to differentiate their products, and one way may be through unique flavor offerings.

She added there has been a significant amount of migration back to the home for entertainment and food, so consumers may be willing to spend more on the higher-quality items to eat and serve at home.

A study conducted by Packaged Facts, the New York-based research firm, said consumers are eating more at home after decades of increased restaurant use, and consumers are eating at home more as they are finding prepared and ready-to-eat foods at grocery stores.

“With the recession has come a migration of foot traffic and food sales from restaurants into the home, and in the short term we believe economic trends favor retailers as consumers seek less expensive meal alternatives,” said Don Montuori, publisher of Packaged Facts. “Sustaining this momentum will require food retailers to continue their transition toward offering higher quality ready-to-eat products. Otherwise customers will leave as quickly as they arrived.”

Packaged Facts said the supermarket and grocery prepared foods category will achieve sales of $13 billion and $14 billion in 2010 and 2011, respectively, with 7% growth during each year.

The NPD Group found the top five factors consumers claim are having the greatest impact on food and beverage purchases are trying to eat healthy, trying to save money on grocery purchases, wanting meals that are easy to prepare, wanting meals that are quick to prepare and needing to stay within a food budget.

Ms. Hickey said consumers are focused more on the basics and aren’t necessarily as focused as much on the more indulgent category. She said higher-end more indulgent products might be at risk in the future.

“As food and beverage manufacturers and retailers begin to rethink their marketing communication programs, as they start their recovery planning, it’s important that they understand their consumer’s mindset,” Ms. Hickey said. “Consumers lost personal wealth in this recession and they are skeptical that ‘things will go back to the way they were.’ In their minds, it appears the road to recovery will be a long one.”

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