Recession and the retail environment
The post-pandemic global recession is set to be one of the biggest the consumer goods industry has ever seen. From previous economic downturns we know that they accentuate weaknesses, accelerate emerging trends, and push businesses to adapt and evolve. This environment, where only the fittest survive, drastically strengthens the importance of data-driven decision making and a clear revenue management strategy.
If the average consumer’s spend for their weekly shop was £35, and due to household bills and other expenditures increasing, it’s now £30, that’s 15% less available for manufacturers to battle over. This poses a significant risk to the P&L’s of FMCG brands, and hinders net revenue growth significantly.
With unemployment on the rise, and a third of those employed concerned about losing their jobs, the majority of consumers will look for value saving opportunities where possible. Inflation accelerated to 9.2% in March this year, and coupled with government energy price cap increases, household bills are set to soar from Autumn when consumers need to heat their homes. This predicted contraction of Q4 puts extra pressure on domestic budgets.
The trends that consumer brands should look out for
As makers of household staples, consumer goods brands have a duty to support nations through the crisis – a lucky obligation as unlike certain industries, no matter what economic changes occur, people will still buy essential items that feed their families.
Despite this, all categories in consumer goods will be affected, and if inflation remains high, consumer brands need to look out for the following trends:
- Shopper attention turns to value
- A shift in value tiers
- A hyper competitive pricing environment
- Promotions on the rise
- EDLP strategies
