The global downturn continues to exert a substantial impact on the grocery buying behaviour of many consumers. Moreover, its effects are likely to be felt for several years to come as economies take time to recover lost output and employment. The initial market shock phase of recession in Europe and the US has now subsided as recovery appears to be underway. Nevertheless, recession has caused significant changes in buying food and drink, in terms of product formats and brands as well as where and how consumers shop for groceries.
This report looks at how the recession has impacted consumer demand and buying behaviour, and how the grocery industry is evolving strategies to suit the challenging business environment in Europe and the US. Analysis is centred on how companies are adapting marketing strategy and developing new products for more budget-conscious, stay-at-home consumers.
Key Features of this report
Scope of this report
Key Market Issues
Key findings from this report
Key questions answered
This report looks at how the recession has impacted consumer demand and buying behaviour, and how the grocery industry is evolving strategies to suit the challenging business environment in Europe and the US. Analysis is centred on how companies are adapting marketing strategy and developing new products for more budget-conscious, stay-at-home consumers.
Key Features of this report
- Survey data showing how the industry expects the grocery market to evolve in the next 5 years.
- Analysis of private label market share growth in Europe and the US and how private label is being developed to meet consumer needs.
- Draws on an extensive database of new food and drink launches in 2009, including products aimed at budget-conscious consumers and others targeted at the growing home consumption sector.
- Coverage and analysis of sectors benefiting from the downturn, and discussion of the recovery path for areas hard-hit by recession.
Scope of this report
- Assess how the economic climate is affecting demand and the structure of food and drink markets.
- Understand specific opportunities in the food and drink market linked to recession’s impact on current and future buying behaviour.
- Evaluate which territories and market sectors offer most potential in the post-recessionary environment.
- Inform your marketing and NPD teams how other companies are developing products and strategies more suited to challenging conditions.
Key Market Issues
- Investment, product development and marketing effort is expected to shift further towards developing economies as a result of deep recession in many developed countries. North America and Europe remain the key consumer markets, but the downturn will significantly reduce the strategic importance of these economies.
- Retailers have benefited from the generally lower prices of private label lines as well as in developing more choice at the budget end of the market. Leading brands can continue to rely on price and value-led promotions whilst anticipating rapid reversion to pre-recessionary demand patterns. A weak recovery coupled with low growth or stagnation may well favour extending band franchises with better value sub-ranges and developing budget brands.
- When, if, and to what extent demand for grocery reverts to a pattern similar to that of the first half of the 2000s is the key determinant of future strategy. The nature and the impact of the recession has varied widely between different marketing territories. Different recovery patterns may well favour development of more localised strategies.
Key findings from this report
- Discount retailers accounted for an average of 16% of the European grocery market in 2008. The discount sector increased market share during the growth years of the 2000s and recession is acting to further boost discounter sales.
- The industry expects price and value to remain a key focus of consumers for years to come. Developing more choice at the lower end of the market and value/price promotional activity are viewed as the most important strategies for targeting budget-conscious consumers.
- Private label share peaks in Switzerland at half of total grocery sales in 2009, and is rising in other European countries. Recession is boosting share of private label as consumers trade down.
- The industry consensus is that North America and Europe will be the regions most affected by the impact of the global downturn over the next 5 years.
Key questions answered
- Which sectors of the market are most resilient to the impact of the recession.
- How the industry expects the recession to impact demand in the future.
- To what extent is private label and hard discounting likely to develop.
- What are the most important strategies for the industry in addressing recessionary or low growth conditions.
- How new branded and private label products are being developed to meet changing consumer needs.
Recessionary Strategies for Food and Drinks
Companies
Executive summary
The recession and spending on grocery
The impact of the recession on grocery sectors
Recession and grocery retail
CHAPTER 1 MACROECONOMIC ANALYSIS
Summary
Introduction
Developed economies in recession
The cost of food and drinks
CHAPTER 2 RESILIENCE, VULNERABILITY AND TRADING DOWN
Summary
Introduction
Immediate impact of the recession
Short-term movement in grocery markets
Resilient sectors of the market
Premium and ethical products
The impact of trading down
Impact on market structure
Case study- Bonduelle
Movement to home consumption
Taking more meals at home
Entertaining at home
Preparation of food for out-of-home consumption
CHAPTER 3 RECESSION AND THE GROCERY RETAIL SECTOR
Summary
Introduction
Grocery retail and the recession
Growth in value retail and discounters
Dynamics of price-driven discount food retail
Building standardized ranges
Targeting high growth segments
Adapting products to suit local tastes
General trading down in grocery retail
Premium private label offering
Ongoing development of lowest price private label
Upmarket retailers develop value ranges
Growth of private label
CHAPTER 4 INNOVATION AND NPD
Summary
Introduction
Price and value strategies
Targeting budget-conscious consumers
Focusing on costs and pricing
Packaging modification
Targeting in-home consumption
Meal occasions out of the home
Displacement of demand
Products and ingredients for home cooking
Home entertainment and treats
Products for out-of-home consumption
CHAPTER 5 OUTLOOK AND FUTURE DEVELOPMENTS
Summary
Introduction
Outlook scenarios for developed economies
Consumer trends over the next 5 years
The evolution of NPD
LIST OF FIGURES
Figure 1.1: Quarterly real GDP growth in Europe, the US and Japan (%), 2008-Q2 2009
Figure 1.2: Economic Sentiment Index, Europe, 2004-2009
Figure 1.3: Unemployment rates in Europe, the US and Japan, % of adults, September 2008-June 2009
Figure 2.4: Rating of resilience to the downturn of different product categories
Figure 2.5: Recessionary impact on market structure
Figure 2.6: Sectors gaining from trading down
Figure 3.7: Retail strategies for recession in the UK
Figure 3.8: Growth in discounter share of European grocery market value, 2003-08
Figure 3.9: Innovative private label offerings
Figure 3.10: Trading down in a recession
Figure 3.11: Grocery private label share (%,value), Europe, May 2009e
Figure 4.12: Balancing experience with value
Figure 4.13: Importance of downturn-related consumer trends on grocery
Figure 4.14: Rating of importance of strategies targeting budget-conscious consumers
Figure 4.15: Rating of options for cutting costs and developing lower price products
Figure 4.16: Expectations of changes in marketing and NPD expenditure during recession
Figure 4.17: Innovation in packaging
Figure 4.18: Out-of-home share of total meal occasions (% of annual occasions), Europe and US, 2008
Figure 4.19: Meals for out-of-home consumption
Figure 5.20: Rating of importance of consumer trends over next five years
Figure 5.21: Rating of impact of downturn on NPD by region
Figure 5.22: Key positionings by year for all food and drinks products (% share of launches), 2007-2009
LIST OF TABLES
Table 1.1: Quarterly real GDP growth in Europe, the US and Japan, 2008-Q2 2009
Table 1.2: Unemployment rates in Europe, the US and Japan, % of adults, September 2008-June 2009
Table 1.3: Monthly changes in food prices, EU economies (%), August 2008-July 2009
Table 3.4: Growth in discounter share of European grocery market value, 2003-08
Table 4.5: Out-of-home meal occasions, Europe and US (occasions bn), 2003-2008
Table 5.6: Impact of outlook scenarios for developed economies on grocery sector 89
Companies
Executive summary
The recession and spending on grocery
The impact of the recession on grocery sectors
Recession and grocery retail
CHAPTER 1 MACROECONOMIC ANALYSIS
Summary
Introduction
Developed economies in recession
The cost of food and drinks
CHAPTER 2 RESILIENCE, VULNERABILITY AND TRADING DOWN
Summary
Introduction
Immediate impact of the recession
Short-term movement in grocery markets
Resilient sectors of the market
Premium and ethical products
The impact of trading down
Impact on market structure
Case study- Bonduelle
Movement to home consumption
Taking more meals at home
Entertaining at home
Preparation of food for out-of-home consumption
CHAPTER 3 RECESSION AND THE GROCERY RETAIL SECTOR
Summary
Introduction
Grocery retail and the recession
Growth in value retail and discounters
Dynamics of price-driven discount food retail
Building standardized ranges
Targeting high growth segments
Adapting products to suit local tastes
General trading down in grocery retail
Premium private label offering
Ongoing development of lowest price private label
Upmarket retailers develop value ranges
Growth of private label
CHAPTER 4 INNOVATION AND NPD
Summary
Introduction
Price and value strategies
Targeting budget-conscious consumers
Focusing on costs and pricing
Packaging modification
Targeting in-home consumption
Meal occasions out of the home
Displacement of demand
Products and ingredients for home cooking
Home entertainment and treats
Products for out-of-home consumption
CHAPTER 5 OUTLOOK AND FUTURE DEVELOPMENTS
Summary
Introduction
Outlook scenarios for developed economies
Consumer trends over the next 5 years
The evolution of NPD
LIST OF FIGURES
Figure 1.1: Quarterly real GDP growth in Europe, the US and Japan (%), 2008-Q2 2009
Figure 1.2: Economic Sentiment Index, Europe, 2004-2009
Figure 1.3: Unemployment rates in Europe, the US and Japan, % of adults, September 2008-June 2009
Figure 2.4: Rating of resilience to the downturn of different product categories
Figure 2.5: Recessionary impact on market structure
Figure 2.6: Sectors gaining from trading down
Figure 3.7: Retail strategies for recession in the UK
Figure 3.8: Growth in discounter share of European grocery market value, 2003-08
Figure 3.9: Innovative private label offerings
Figure 3.10: Trading down in a recession
Figure 3.11: Grocery private label share (%,value), Europe, May 2009e
Figure 4.12: Balancing experience with value
Figure 4.13: Importance of downturn-related consumer trends on grocery
Figure 4.14: Rating of importance of strategies targeting budget-conscious consumers
Figure 4.15: Rating of options for cutting costs and developing lower price products
Figure 4.16: Expectations of changes in marketing and NPD expenditure during recession
Figure 4.17: Innovation in packaging
Figure 4.18: Out-of-home share of total meal occasions (% of annual occasions), Europe and US, 2008
Figure 4.19: Meals for out-of-home consumption
Figure 5.20: Rating of importance of consumer trends over next five years
Figure 5.21: Rating of impact of downturn on NPD by region
Figure 5.22: Key positionings by year for all food and drinks products (% share of launches), 2007-2009
LIST OF TABLES
Table 1.1: Quarterly real GDP growth in Europe, the US and Japan, 2008-Q2 2009
Table 1.2: Unemployment rates in Europe, the US and Japan, % of adults, September 2008-June 2009
Table 1.3: Monthly changes in food prices, EU economies (%), August 2008-July 2009
Table 3.4: Growth in discounter share of European grocery market value, 2003-08
Table 4.5: Out-of-home meal occasions, Europe and US (occasions bn), 2003-2008
Table 5.6: Impact of outlook scenarios for developed economies on grocery sector 89
