Specifically, it suggests that a lack of financial confidence in the middle class, a growing preference for experiences over possessions, geographic shifts in “market frontiers” and the rise of conscious consumerism all stem in part from the financial collapse and following recession. Given the time that has passed and the growing strength of these trends, Euromonitor suggests they are “mega trends” that will continue to shape consumer spending through 2030.
One of the most acute ways in which the financial crisis and following recession continues to impact the food and beverage industries is in the retreat of the middle class, Euromonitor argues in its report, “Megatrend Analysis: Putting the Consumer at the Heart of Business.”
It explains that many in the middle class are struggling to maintain their economic position or fear that unexpected events, like those following the housing collapse, could take away their financial security – as such they prize frugality that allows them to save for a rainy day, according to Euromoniter.
This mentality has helped fuel a rise in discount grocery stores and placed strain on more traditional hypermarkets, according to the report. It notes that in 2014 the growth of sales at discounters caught up to that of hypermarkets at a bit more than 160%. But since then, sales at discounters continued to climb to more than 180% in 2017 compared to that of hypermarkets, which began to flatten out just above 160% growth. This difference will continue to widen, with sales and discounters projected by Euromonitor to grow more than 200% in 2020 and hypermarkets coming in just under 180%.
This trend can be seen sharply in the booming popularity of small-format stores that prioritize less expensive store brands, such as Trader Joe’s, which just scored the top slot in dunnhumby’s retailer preference index, and the downward price pressure Lidl’s is placing on competing retailers in recently entered markets.
CPGs that offer experiences will win at market
Another long-term impact from the recession is consumers’ increasing emphasis on experiences rather than possessions, suggests Euromonitor.
“We can see the sharp divergence in trends following the global financial crisis when real growth in spending on durable goods fell and spending on services continued to grow,” according to the report. It shows that the real growth in global consumer spending on goods in 2010 was about 125% versus the growth of services at 175%, and it projects the spread will continue to widen until in 2030 spending on services is growing about 325% versus about 225% for goods.
For the most part this trend has benefited food and beverage, with retailers and restaurants “placing more emphasis on the consumer experience as a vehicle for boosting sales and margins. This includes creating more intimate experiences with consumers, providing a seamless shopping environment whether online or in-store and personalizing their offerings,” according to the report.
Packaged goods also are getting in on the trend by enhancing the consumption experience. For example, Magnum, which is known for ice cream bars dipped in a crunchy coating, recently launched tubs of its ice cream that are encased in a chocolate shell. This allows consumers to replicate the crunch of biting into one of its bars by squeezing the tub to break the shell so they can scoop the ice cream.
Broad shifts in economic stability, paired with other indicators such as over-farming and over-population, also changed where there is the most potential for growth, according to Euromonitor.
“To ensure future growth, businesses will have to adapt to the changing demographic, economic and technological reality bringing new markets from frontier into the spotlight,” it explains.
For example, when China’s population began experiencing higher disposable incomes, better infrastructure and adoption of modern technology, such as high-speed Internet, Nestle moved fast to acquire a Hong Kong based confectionery manufacturer with “considerable shares in the China market” in 2011. Four years later it used this channel to re-introduce KitKat to access more consumers in mid-sized cities in China, according to the report.
Conscious consumerism stems from lost trust
The market collapse also caused consumer trust in companies to falter and pushed them to consider companies’ social responsibility before giving them their hard earned money.
“This translates into decisions framed by concerns about the environment, sustainability, animal welfare, production and labor practices, as well as a desire to positively impact communities and people,” Euromonitor writes.
As such, Euromonitor reports a rise in global retail sales for products bearing ethical labels. In 2015, it notes, products with recycling labels saw sales upwards of $325 billion, followed by clean labels at $125 billion, locally sourced at about $75 billion and responsible forestry at about $25 billion.