Consumers may feel financially constrained and cautious currently, but that does not mean that they’re only prioritizing price rather data from Nielsen IQ shows that they are intentionally trading up, trading down and trading out of categories and channels based on their health goals, social values and their budgets.
This means that brands that want to grow need to meet them, not only where they are, but when they’re engaging.
“We really are seeing that there is kind of a bifurcating consumer, and there are consumers that are feeling really strong about their finances, feeling like they’re thriving, but there is also a set of consumers on the other hand who are struggling,” but both groups are feeling “a little less financially secure,” said Sherry Frey, VP of total wellness at NielsenIQ.
She explained that at the top of their worries is higher grocery prices, which when compounded with concerns outside of their control – like global conflict – they tend to pull back on their spending.
Financial fears create opportunities for grocery brands and retailers
That increased caution is good news for packaged food and beverage players because it is creating new opportunities to engage with shoppers as they change where and how they spend.
“One of the things that they’re looking to do is spend less out of home,” in terms of dining or entertainment, “which actually brings them to the store more often,” she said.
She added that as consumers pull back on out-of-home spending, many are reinvesting some of those saving into elevated at-home dining – opening the door for premium products across all income brackets.
“People always think, ‘Oh, premium products, that is only for higher income consumers,’ but interestingly, we’ve actually seen lower income consumers are often very likely to be willing to try new things,” which means there is a “huge opportunity” for higher quality products, Frey said.
What do consumers mean by higher quality?
Consumers’ focus on quality is closely tied to trust and the value and values they expect brands to deliver.
This means they are looking for products that are what NIQ calls “better for,” which Frey says is “a combination of better for society, better for the planet, better for each other.”
Even when inflation was its highest and consumers were pulling back on spending across the board, sales of ‘better for’ products still outpaced overall food and beverage sales – not just among higher income consumers, but all shoppers of all economic levels, Frey said.
Top ‘better for’ claims that consumers want are related to environmental sustainability, including animal welfare, according to Frey. This is notable because many companies pulled back on environmental, social and governance claims since the second Trump administration began targeting ‘woke’ messaging and businesses feared a backlash.
This pullback, however, was not mirrored by consumers, Frey said.
How can brands share their values and earn consumer trust?
One way that brands can communicate their values and earn consumer trust is through third-party certifications and romance copy on packaging that explains how they source ingredients, their sustainability practices and other efforts to ‘do good,’ she said.
Taken together, these trends show that while consumers are increasingly cautious, they are far from simplistic and brands that recognize the full picture of value will be best positioned to earn their trust and business.
Frey underscored this takeaway by encouraging brands and retailers as they think about changing consumer dynamics not to “automatically only go to a price conversation.”
