The Rising Cost of Living
2022 has hit consumers with a rising cost of living which many are finding difficult to absorb. Whether rapidly rising energy costs to heat the home, fast increasing prices at the petrol pumps to fill the car or the steep rise in food prices – no one is immune to the impact of the crisis. Everyone is worse off – for some it might be a headache, but for many on lower and middle incomes the rising cost of living is threatening to plunge households into real hardship – forced to make decisions about whether to heat the home or put food on the table.
As a result of sanctions imposed in the wake of the war in Ukraine, Europe in particular has been exposed by its reliance on energy imports from Russia – as governments and the EU take a stance to find alternative sources of gas and oil, or develop alternative energy sources, the consumer is feeling the pain.
Inflation is increasing across European markets at rates not seen for a generation, yet despite many markets seeing historically low unemployment rates and even some countries seeing vacancies outstrip the available pool of those seeking employment, wage increases are at the best modest, and no-where are they keeping pace with actual inflation. Simply put, people are feeling poorer.
With this bleak view of the short to mid-term future, many consumers are re-assessing how they shop, where they shop and how they set their priorities. Eating out, family days out and even the spring break and summer holiday (undermined even more by chaos at numerous European airports) are no longer the affordable luxuries they may once have been.
What does it mean for A brands in retail?
Choices are being made – and in this climate where every penny counts, traditional A brands in the supermarket and grocery stores are especially vulnerable. However, we see hope for A brands as well – those who are able to communicate and substantiate their value are still able to remain valid and relevant. Where they may have been an unquestioned choice a year ago, now they need to show that they offer the consumer real value – whether that be by truly superior performance compared to competitor brands, or justifiably greater quality. Simply resting on past laurels is not enough as supermarket A brands need to remind consumers why they are the right choice – and still represent value for money.
For food this differentiation and edge may lay in better quality and healthier offers (less sugar, fewer additives, more nutritional value, better taste), but it may also reside in ethical or sustainable advantages too (supply chain advantages, packaging advances, care for and fair treatment of growers). These brand stories matter now more than ever as consumers will be looking for hard reasons to justify sticking with their favourite A brands.
Brands which fail to recognize this reality risk losing saliency and can be easily passed over for the cheaper ‘good enough’ alternative.
How can we help with the crisis?
ADK INSIGHTS tracks and monitors changing consumer behaviours, and works with brands worldwide to help them find the competitive edge to grow and remain strong.