The consumer sector is holding its breath as consumer spending might react in the coming months amid spiraling inflation that has hit food and beverages in particular with a CPI hovering around 14% of late.
Distribution companies, industry and the primary sector remember the consequences of the financial crisis that began in 2008. A year later, in 2009, Spanish household consumer spending fell 5% in value and almost 4% in volume, according to the National Institute of Statistics (INE) and the Bank of Spain. They’re the most significant drops since then, discounting the extraordinary impact of the 2020 pandemic.
The differences from back then are remarkable. This year, the country’s economy ended with a 3.6% recession. Instead, the government forecasts GDP growth of 4.4% and 2.1% in 2022. And the unemployment rate reached 18.8% in 2009, compared to the current 12.6%. Significant factors that allow companies not to enter into a scenario of maximum alert.
According to data from NielsenIQ, mass consumption sales are currently growing at a double-digit rate due to the effect of inflation. However, the general increase in prices in the shopping basket is slowly having an impact on falling purchase volumes for groceries and is motivating significant changes in the routine of consumers looking for formulas so that their purchasing power does not disappear when they return from the supermarket.
A major change has to do with the value of the shopping basket, ie what the consumer now spends on the list of products considered essential. In this case, this value not only does not grow at the same rate as prices, but in some cases even falls. Operators such as Carrefour, Dia and Eroski confirm this.
fragmentation
The French group points to the Spanish market as the country where this trend is more pronounced a “lower” average basketas a result of “an increase in sales of products with lower unit values“.
In other words, the consumer’s choice in this list of basic items goes to the less expensive references. And there the private label has a key weight, which is used by the distributors as an anti-inflation tool, although its price increases in line with the rest of the banners.
In the specific case of Carrefour, the sale of private label items already accounted for 33% of total sales at the end of the third quarter. In the sector as a whole in Spain, its weight in sales of groceries is now over 48.4%, reaching 42% in all mass consumption categories according to NielsenIQ, six points above the European average.
“Our own brand has grown by four points, and that means that the value of our average shopping cart is going down,” Ricardo Álvarez, CEO of Dia España, told Cinco Días. The white label accounts for nearly 52% of sales through September. The range of products that are on average between 30% and 40% cheaper means that the average shopping cart is down 1.3% in all of its markets.
“The mix works Products with lower unit price. Customers are looking for savings by going to our brand, in addition to the promotions we run,” says Álvarez. In early September, the company estimated the value of the promotions run to date at 130 million.
Eroski estimates these savings at 150 million and the growth of his white label at around 1.5 percentage points. “Like all of us, we have raised the prices. But if the average inflation carried over to the entire line is 10%, the average ticket has experienced a much smaller 3.5% increase,” explained its CEO. Rosa Carabel, at the last Aecoc Congress. “These promotions are influencing that, the growth of own brand weight and the choices that the consumer is making,” he added.
The value of the basket decreases, but the number of tickets increases. At Dia 8.4% in the third quarter. Carrefour also notes an increase in store visits. That means the customer goes to the supermarket more, a general trend. According to NielsenIQ, the The number of visits to the store has increased by 5% as a measure to better control your spending.
The holiday campaign, which the industry expects to take place amid normal spending, will curb any more aggressive spending cut tendencies. On the other hand, the celebration of the World Cup in Qatar between November and December brings with it an element of uncertainty. It seems clear that the slope will be steep next January.
Buy fresh groceries, chopped
statistics. The CEO and President of Aecoc, Ignacio González, illustrated a few days ago what kind of choices the consumer is making today. “You choose between cheaper references and categories. Instead of beef, the customer chooses chicken. And instead of fresh fish, surimi.” This type of arbitrage has a direct consequence: the purchase of fresh groceries is declining. According to statistics from the Department of Agriculture, with the latest data updated to July, when the CPI for food was already up 14%, consumption of fresh meat fell by 13%, more noticeably for beef (-18%) than chicken (- 13.9%) or pork (-10.6%). Fish saw a 14.5% drop, with a sharper drop for fresh (-15.9%) than frozen (-14.8%), while canned fish fell by just 7.7%.
fruit. Fruit was also unsaved with an overall decrease of 10.6%, as were vegetables (-13.2%). The comparison with the year 2021, which was still characterized by the restrictions caused by the pandemic in the first half of the year, must be taken into account. However, consumption in all these categories was below 2019 levels, averaging 7%.