Balancing spending with sustainability: How is consumer behaviour changing amid cost-of-living pressures and global warming?

By Natasha Spencer-Joilliffe

- Last updated on GMT

The ongoing cost of living crisis is placing stress on already-stretched consumer budgets and climate change is driving consumers towards more sustainable purchases. GettyImages/gyn9038
The ongoing cost of living crisis is placing stress on already-stretched consumer budgets and climate change is driving consumers towards more sustainable purchases. GettyImages/gyn9038

Related tags cost of living crisis Inflation Sustainability Climate change

Simultaneous cost of living considerations and climate change concerns are prevalent among consumers, changing how and what they buy.

Consulting company Ernst & Young (EY) has published its 13th Future Consumer Index (FCI)​ results, identifying changing consumer behaviours and spending patterns amid the cost of living and climate change crises. The ongoing cost of living crisis is placing stress on already-stretched consumer budgets and climate change is driving consumers towards more sustainable purchases.

Cost and climate spur change

“The latest EY FCI reveals rising food prices are driving consumers to prioritise essentials and optimise grocery budgets,”​ Marie Bos, Senior Analyst of Global Consumer Industries at EY, told FoodNavigator.

EY’s FCI reveals the latest food industry-related insights, detailing how the cost of living crisis is causing consumers to reevaluate how they shop for food and beverages and what purchases they make. Four-fifths (80%) of global consumers remain worried about their finances, and almost half (46%) expressed extreme concern about climate change, the Index, which surveyed 22,000 consumers in 28 countries, found.

More than half (54%) of global consumers plan to lower their future purchases. The leading drivers to reduce their consumption patterns are the need to save money (73%). The FCI results reveal the close connection between economics and the environment, with 67% of respondents stating their deep concern for the planet's fragility as the core reason behind their intention to change their consumption patterns.

Over half (56%) of respondents believe consumers should push companies to have better social and environmental outcomes. In comparison, 73% of respondents state that companies need to lead the ecological change, and 77% say governments need to be responsible for leading this climate overhaul.

Almost half of consumers (49%) also believe that new buys are not necessary. Of those asked, 80% reveal they intend to spend less on goods relating to socialising, with 41% planning to stay home more, representing an increase of 6% points from October 2022.

Stretched budgets alter spending habits

The cost of living crisis has impacted consumer spending in the food industry, the FCI results reveal. Its latest wave of data suggests consumers are reducing their list of necessities to meet their stretched budgets, opting for less expensive brands, and discontinuing delivery subscriptions, leading to rising foot traffic in stores and a greater focus on store brands by retailers.

Over half (57%) of consumer respondents are concerned about the increasing cost of groceries and household essentials, 49% purchase only the needs and 39% plan to spend less on grocery delivery services in the next three to four months. Consumers are considering what constitutes value and necessity. The survey found that 29% of shoppers evaluate what is essential, indicating these lists are shortening.

Branded private label goods are losing their purchasing power with consumers, as 64% of consumers feel private labels satisfy their needs just as well as branded products, and 61% say private labels are helping them to save money. “As the price difference narrows between private-label and branded products, grocery consumers will buy based on price and not maintain brand loyalty,”​ Bos said.

Baskets are changing, too, with consumers saying they will buy fewer snack foods. Jon Copestake, Global Consumer Senior Analyst at EY, shared this is “likely a result of ongoing price increases within the category and fresh food becoming more affordable as inflation stabilises”.

Further, these evolving purchases are also likely a reflection of consumers wanting to be healthier in general, Copestake said. Almost a third of consumers, 32%, anticipate their physical health to improve.

However, trust is vital, as consumers will look for brands they trust, and 35% of consumers say they will pay extra for products by their trusted food brands, representing an increase of 10% from February 2022. As we approach the end of 2023, Bos commented on the importance of trust, “this will be critical heading into Q4 as companies plan to invest more in promotional activity and marketing to win back shares lost to private labels and minimise future gains”.

Personal climate change experiences influence purchases

The FCI also reveals the importance of climate change in consumers' purchasing habits, indicating that consumers are thinking about changing their lifestyles after being personally affected by the climate crisis.

One of the top findings is that more than half (51%) of consumers have been impacted by product pricing changes. Adapting to their climate change needs, these respondents consider changing their food because the environmental crisis has increased costs or reduced availability. As a result, 29% have already made these choices and had to change the foods they eat. “More importantly, and the bigger story is how many more consumers are thinking about changing the foods they eat, which is at 42% globally,”​ Bos shared.

Consumers want to buy better products for both themselves and the planet. However, older consumers are more active in adopting lifestyle behaviours to reduce their impact, such as bringing reusable bags to food stores and recycling or reusing packaging after use.

Compared with the US and China, EY found that European consumers were the most active regarding these particular behaviours. Yet, younger Gen Z consumers are more likely to spend more sustainably and check companies’ environmental claims.

Another major shift, EY reported, is consumers' need to buy more bottled water, with 27% of consumers stating they are required to buy more bottled water, while another 32% are planning to do so.

Generational differences are also prevalent in bottled water buying. “Older consumers are more holistic while younger consumers are much more interested in buying sustainably and scrutinising brands on their impact or reformulation efforts,”​ Copestake said. For example, older consumers are more likely to engage in activities such as recycling and conserving water.

Impact on food retailers

Food retailers' buying and stocking decisions will also see significant shifts. “This will impact stocking and buying decisions,”​ Bos said.

The FCI sees 88% of consumers making an effort to waste less food. In addition, 39% plan to spend less on snack food, and 34% of consumers plan to buy more fresh food. “Retailers will need to align with these behaviours in their category management, buying strategies, planograms, and retail formats to become more sustainable overall,” ​Bos said.

Over three-quarters (78%) of consumers also said they want companies to play a more significant role in securing a sustainable future, as consumers feel they can only do so much. “Here is an opportunity to reduce their sustainable impact, “ ​Bos detailed.

Related topics Manufacturers Markets R&D Bakery Snacks

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