An excerpt from Circana's FMCG Outlook Report 'From little things, big things grow' - March 2024
The way people interact with retail brands continues to evolve. 2023 saw successful brands and retailers transition to a new age of customer experience amid soaring inflation, interest rates and the fast-rising cost-of-living. The value of ‘value’ is still ever present for Australians, now in the face of disinflation as our economy keeps growing albeit at a slower pace. This is bringing a change of pace for Australia’s near-term outlook as disinflation drives our expectation for slowing sales growth in 2024.
Disinflation represents a mixed picture for Australians. It signals relief for those whose purchasing power has eroded but also perhaps makes brands overlook the cumulative pricing pain that shoppers feel, particularly in FMCG. We expect changeable base price elasticities and competitive interactions despite slower price growth. And while inflation may be easing, the pain and frustration that shoppers feel at the checkout continues to persist. Australians are still paying dramatically higher prices when in the height of the pandemic.
Nine in ten Australians are worried about paying for food as inflation continues to drive up prices1
‘Sustained sticker shock’ in groceries alone is witnessing a 15% increase in unit prices while the price per volume lift is exceeding 23%2. And household budget pressures are challenging value too. Our research3 reveals the very jarring impact of these types of longer-term food and grocery price increases; however, this worry is less apparent for household essentials and healthcare products – most likely because they are inescapable, frequently purchased essentials. Continual exposure to more moments of ‘sticker shock’ will remain for the foreseeable future as inflationary repercussions hover.
Remember, value remains the current mindset of Australian shoppers who are now more:
- Compromising – 45% are giving up their favourite brands to save money (+19pp since 2021)
- Cautious – 40% are not trying as many new products (+8pp since 2021)
- Considered – 73% now always compare brand prices before choosing (+3pp since 2021)4
Remember, from little things, big things grow – so what’s your strategy?
Disruption will continue in 2024, and in Australia’s ever-more value-based economy, it is critical to be nimble, agile and ready to connect with and continue to support shoppers. Trial AI and other new tech, be social with little luxuries that could influence new innovations, and always place loyalty and consumer need at the heart of everything you do. Australians continue to be in the driver’s seat, and you need to meet them where they are in the moment with what matters to them – no matter how small. Because from little things, big things grow.
For more insights, download the full copy of the report here
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1 87%. A Kollmorgen, Worries about energy and grocery prices reach new highs, Choice, 4 July 2023, accessed 17 November 2024
2 Circana Shopper Panel, data to 08/10/23
3 Circana Shopper Panel Survey, June 2023; n = 5,042
4 Circana Shopper Panel Surveys, June 2023; n = 5,042; January 2023; n = 5,031; and 2021, n = 5,508
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