NETHERLANDS – Consumers are spending less on basic staples and splurging more on premium brands in supermarkets and fine dining, according to a new report from The Netherlands-based Rabobank.
These “hybrid consumers” are less interested in mid-market products, resulting in an increasingly polarized food retail market into value and high-end.
“The implications of this market trend are profound and touch on areas such as product offerings, distribution channels, marketing and brand management,” said Marc Kennis, senior analyst of Rabobank Food & Agribusiness Research and Advisory. “Given the driving forces of hybrid consumption, i.e. women’s increasing role in household spending and the growing importance of millennials (generations Y and Z), we believe that hybrid consumption is a long lasting phenomenon. Therefore food processors, food retailers and food service companies alike will need to adapt or risk fading away.”
Three main forces drive the trend: socio-demographic developments, which include the growth of women’s purchasing power, as well as younger generations whose food choices are influenced by social media; food retailer strategies that include having more discounted options available as well as a boon in private label products; and macro-economic developments, including impacts of the global recession that have pinched disposable income for many, save for the occasional splurge.
Between 2007 and 2012, the top performing retailers were either hard discounters, such as Aldi, or premium retailers, such as Whole Foods. Mid-market retailers showed lower growth rates during the period.
To target the hybrid consumer, food retailers and food service companies may consider moving up to the premium segment of a specific product category, offer value products within the premium segment and premium products within the value segment and use value products to sell products. An example of the third strategy would be selling coffee at a low price point to generate traffic while offering food products at a higher price point.