Consumers Will Spend Less on Groceries in 2024: Report
HOW WILL CPG companies navigate through the lingering effects of the post-pandemic era? They must deal with a crunch in consumer budgets and intensified competition among brands vying for a share of the constrained spending.
Geopolitical uncertainties, particularly in Ukraine and the Middle East, further contribute to the complexities impacting consumer-facing industries such as Retail, Consumer Products, and others.
To help businesses thrive in this challenging environment, AlixPartners, a global consulting firm, conducted an extensive consumer priorities survey across seven countries, including France, Germany, Italy, Saudi Arabia, Switzerland, the UAE (United Arab Emirates), and the UK (United Kingdom). Between October and November 2023, over 10,000 respondents were surveyed, by YouGov for AlixPartners, and provided insights into their personal purchase intentions and shopping preferences for the upcoming year.
The Critical Consumer 2024 research looks at how consumer sentiment has shifted across markets and where spending habits will turn next. The report is broken into the following five areas of focus:
Spending Intentions: Navigating economic uncertainty in the holiday season.
The holiday shopping season faced a heavy price pinch, with consumers adjusting spend due to elevated inflation. Notable trends included a rise in trading down to more affordable brands, particularly in the retail sector. Consumers were expected to focus on value-right products that provide strong value-for-money.
Looking forward, 21% of consumers will spend less on groceries in 2024.
Category Evolutions: Impact on discretionary spend across categories.
Financial difficulties will lead EMEA consumers to shop less frequently and spend more cautiously across various non-essential retail and leisure categories in 2024. An efficient product range and offering is imperative to capture spend in retail, while quality remains critical for leisure operators. The data also highlights age as a strong indicator of retail spend reduction, with younger consumers less willing to let economic conditions impact their lifestyle.
Omnichannel Targeting: Adapting to shifting consumer preferences.
Omnichannel solutions are critical as consumers shift spend across channels and categories to manage budgetary pressures. Digital payment methods are preferred, but preferences vary based on income levels and age. Companies must consider these factors when tailoring marketing and promotional strategies to invest in the right areas.
Customer Personalization and Loyalty: Importance of personalized experiences.
Consumers now expect a personalized and frictionless experience at every touchpoint in the omnichannel shopping journey. Personal interaction remains crucial, with nearly two-thirds of EMEA consumers preferring personal contact with in-store assistants. Efforts to augment consumer loyalty must extend beyond pricing to a thoughtful, tailored user experience.
Use of Technology: Embracing generative Artificial Intelligence and modern digital offerings.
Generative AI has become crucial in improving the online buying experience, particularly in sectors where consumers prefer to test products in person. The adoption of AI tools for research is catching on fastest in the Middle East. Consumers across regions show enthusiasm for modern digital offerings such as virtual fitting rooms via AR and unmanned stores.
The economic headwinds in 2024 will likely accelerate transformation and consolidation in consumer-facing industries, driving increased competition. The outcomes of such turbulent times will determine the survival and thriving of players in saturated markets.
Commenting on the new research, Matt Clark, Partner & Managing Director and EMEA Retail Lead at AlixPartners said, “Our latest consumer research shows widespread belt-tightening across the board, with only grocery maintaining spend levels but even here, volumes still drop sharply because of inflation. Only those retailers at the very top of their game will retain or grow share of wallet and I fear we are in for another round of restructuring and consolidation in early 2024.”
Andrew Searle, Partner & Managing Director and EMEA Consumer Products Lead at AlixPartners said, “The message is clear for the Consumer Goods sector. Consumer behavior is continuing to shift into 2024 and the ability to pass inflationary increase prices without significant volume loss is over. As retailers’ position to be the champion of consumer value, the CPG-retailer dynamic is shifting. 2024 will be a challenging year for Consumer Goods companies. Only the most proactive management will thrive in this environment.”
