What will the new year bring you product developers in terms of changing consumer habits and trending ingredients?
The email inbox during December was littered with predictions for the new year, and almost all of them mentioned in one way or another the I word: inflation. What will inflation in consumers’ lives do to their general purchasing habits and ability, how will they react to rising store prices, how are food & beverage processors dealing with higher ingredient costs?
First, we’ll get deeper into that subject, but further down we have some predictions about flavors, ingredients and consumer trends, so read on.
Inflation
The latest Consumer Price Index report on inflation, released in mid-December, showed a slight deflation of inflation. The Labor Dept.’s CPI rose 0.1% in November from the prior month, compared with a 0.4% rise in October.
That means annualized inflation in November climbed at the slowest 12-month pace since December 2021, 7.1% a year, down significantly from the 7.7% annual increase in October and well below June’s 9.1% peak – but still above the 2.1% average rate in the three years before the pandemic.
Food and beverage prices were still exceeding the other components of the CPI, having increased 0.3% in November compared to October. Overall food inflation grew 13.2% versus one year ago; however, monthly increases compared to one year ago have leveled off over the past four months.
Everyone making new-year predictions on spending thinks inflation has altered consumer buying over the past year. As a result, “redefining value” is Innova’s top trend for the new year. “In 2023, value is what consumers need more than anything, and they’re redefining what exactly that means,” the global market research firm Innova Market Insights writes. “According to our research, cost and value for money have become more important to one in two consumers globally this year.
“As financial volatility and societal uncertainty rage on, consumers seek more support from their favorite brands and chosen food and beverage products,” Innova continues. “Brands, manufacturers and retailers need to understand deeply where consumers are willing to compromise in order to combat the current instability we’re all experiencing.”
Similarly, a report from IRI Worldwide says, “Consumers are continuing to employ a range of strategies to reduce spending, such as switching to private labels, trading out of expensive food categories and trading down to mainstream and value brands, as well as consuming more at home versus away from home.”
Private label products thrive during economic uncertainty. As Steve Oakland, CEO of TreeHouse Foods, told us two months ago, “Before [the pandemic], private label had 20 years of slow but steady growth. But we’ve seen step changes in private label’s share of market during previous downturns in the economy.”
Some other points from the IRI report:
Within the store, inflation has moderated. Perimeter areas, including produce and deli, have seen inflation slow to 8.2% versus one year ago, while inflation within center store, which includes snacks, frozen meals and other frozen foods, has leveled off in November at 14.9% versus one year ago.
Several product categories enjoyed price declines in November. Categories with the largest month-over-month price decreases included root vegetables (-7.2%), bacon (-3.4%), butter/margarine/spreads (-2.0%) and chocolate candy (-2.0%).
Inflation varied significantly across the store. Fresh meat & seafood and beverage alcohol segments rose just 4.3% versus October and 6.3% versus one year ago. However, other categories rose dramatically, such as dairy (+23.4%) and bakery (+18.4%).
In October, a survey by Acosta, a global sales and marketing agency, found 83% of consumers perceive that we are currently in a recession or that one is coming soon. A separate Acosta study found 48% of consumers are buying less groceries and 53% are eating out less, just as food at home costs are rising faster than food away from home.
Despite that last point, 70% say they are cooking more at home to save money. They’re managing higher prices by eating the food they have on hand before buying more and sticking to basic food necessities for their shopping lists.
Dining and Cooking