Stagnant wage growth continues to restrict grocery purchases, IRI says

By Elizabeth Crawford

- Last updated on GMT

Stagnant wage growth continues to restrict grocery purchases, IRI says

Related tags: Iri, Marketing

Consumers likely will not loosen their purse strings to fill their grocery carts with premium or unnecessary foods any time soon, even though gas prices, unemployment and inflation are down, according to IRI’s MarketPulse survey published Feb. 4

The survey revealed 80% of consumers feel like their financial situation is worse or unchanged today from a year ago, and 22% say they are still struggling to afford necessary groceries – a figure that is unchanged from a year ago.

A main contributor to the lack of financial relief for consumers is wages continue to remain stagnant, even as other financial indicators improve – hindering consumers ability to increase spending or saving, the survey explains.

“Throughout the third quarter of [2014], wages increased an average of 2%, only slightly ahead of inflation,”​ which was 1.7% in 2014 and is predicted to be 1.1% in 2015, IRI said. It adds that this growth – or lack thereof – remains well below the pre-recession wage increases of 3% or more.

“Retail sales bear out consumers’ frustration and concerns about stagnant wage growth,”​ falling 0.9 points in December – a generally strong month bolstered by holiday shopping, the report adds.

This drop, paired with consumers’ financial insecurity suggests “real growth will take longer than most had hoped or expected,​” IRI said.

Reaching consumers

Consumer packaged goods manufacturers and retailers will need to adapt their marketing strategies to remain relevant to consumers who will continue to pinch their pennies in 2015, IRI suggest.

For example, manufacturers will need to communicate more often and more effectively the value of their products either through price promotions, coupons, offering large value packs or smaller packages at a lower price point, IRI suggests.

It notes that these strategies will help manufacturers reach the 47% of consumers who will stock up on sale items to save money, the 43% who will buy larger packages to get lower prices per serving and the 27% who will buy brands other than their favorites because they are on sale.

Manufacturers also should increasingly reach out to consumers on social media, through smart phone apps, online advertising and in-store touch screens to share their marketing messages, IRI recommends. It explains that consumers say these tools all are 2 to 6 percentage points more influential than in 2011.

“Throughout 2015 and beyond, CPG marketers must continue to invest in these technologies, facilitating consumers’ deal seeking and information-decision-making behaviors,”​ IRI notes, adding: “To be effective, digital and social media tools must be fully integrated into all efforts to communicate brand stories.”

Getting marketing messages out before consumers enter grocery stores also is key because to save money 66% of consumers say they will make a shopping list prior to going to the store and 15% say they will avoid entire aisles to avoid unplanned purchases, according to the survey.

Sales of perishables are a bright spot

Some segments of the food industry will benefit from consumers continuing to tighten their belts – mainly perishable foods and products sold around the perimeter of the store, IRI notes.

One way 47% of consumers say they will save money is by eating out less and making more meals “from scratch”​ rather than from more expensive convenience foods, the survey reveals.

This is the same as in the fourth quarter of 2011 for homemade cooking, but down slightly from 55% of consumers who said they were eating out less to save money, according to the report.

These behaviors will translate into a 3.9% increase in sales of perishable foods in 2015 to more than $142 billion, IRI predicts. This is “solid”​ even though it is down from 5.2% growth in the category in 2014.

“As evidenced during the past several years, center store foods will continue to compete to protect against shifts to the perimeter,”​ but will see slower growth, IRI says. It predicts sales of other edibles will grow only 2.1%, which is “on par with industry average.”

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