Irish consumers have less money to spend on food and less time to shop but they still want to get quality – even when buying own-label products
LAST THURSDAY more than 100 Irish food producers and suppliers gathered in the Aviva stadium in Dublin to stare into a crystal ball. What everyone in the room overlooking the sodden grounds wanted to know was what consumers here and abroad want from them and what those consumers will want five, 10 and 20 years from now.
The conference was organised by accountancy firm Grant Thornton and before the doors opened it did what such firms do best: it looked at statistics and crunched some numbers. “Understanding how core purchasing decisions are shaped by relative prices, incomes, ages, preferences and technology will be the ‘new normal’ in which clever data capture and analysis will be as important as the manufacturing process of the product itself,” said Ciara Jackson, the author of a report given to delegates, opening the event.
Jackson pointed to trends that she believes will help producers to keep their heads above water in increasingly choppy seas.
So, what do we want? We want a more varied diet and we want it for less. She said the key things the 21st century consumer is looking for is “value, convenience, health and wellness, and provenance”.
The seminar focused first on the global marketplace and as jolly music played, some very unjolly facts were outlined in a slickly produced video. About 30 per cent of the food produced around the world. The amount of food lost or wasted each year equates to more than half the world’s annual cereals crop. It is hardly surprising that people in the developed world are the most wasteful. In fact, those in the first world waste nearly as much food each year (222 million tonnes) as is produced in sub-Saharan Africa (230 million tonnes).
Much of the food that we are not wasting we are using wrongly. About half of the world’s corn and 90 per cent of the soybean crop is used to feed livestock. Millions of acres of arable land is being used to grow animal feed, which means there is less land available to grow the wide variety of staple crops, vegetables and fruits necessary to give humans a balanced diet.
After that damning assessment of our profligacy, Jackson identified four distinct generations of Irish shopper and gave them fittingly foodie names: Kerrygold, Smash, Marathon bar and Red Bull.
The Kerrygold generation are born in the 1950s and 1960s. They spend a higher percentage of their income on food and are more likely to buy private label brands than branded goods. They display this frugality despite the fact that they are wealthier, live longer and have more time to spend money than any other generation characterised in the report.
The Smash generation are those born in the 1970s and 1980s. Unsurprisingly, much of this cohert are in negative equity and spend more on housing-related costs than on food and drink. Because of their property woes, they have less discretionary expenditure and are increasingly frugal. They are also increasingly buying own-label products. They are cash- and time-poor, so value and convenience matter more than anything else when it comes to shopping.
The Marathon generation were born in the 1980s and 1990s. They are unemployed, in university or have emigrated. If they still live in Ireland, there is a very good chance they live at home with their parents. They are cutting back on going out or to restaurants and having nights in or takeaways instead. They are a tech savvy, instant-access generation, likely to be influenced by social media and to buy online. While their income levels are low they are not heavily indebted and are less likely to part with cash as impulsively as in the past.
Then we have the Red Bull generation are those born after 2000. Ireland has been experiencing a baby boom since 2006. The number of children aged under 14 has risen by more than 115,000 and now accounts for more than 21 per cent of the population.
Many of the Red Bull generation have no business drinking Red Bull and certainly have no money – what with being infants and everything. Their parents have money and, while they are buying own-brand for themselves they are still likely to purchase branded goods for their kids.
The kids have been brought up with the internet and embrace technology – smartphones, using m-technology and social media. They have also been reared on discount culture and peer reviews and those with money are savvier than other generations in purchasing decisions.
One of the key trends Grant Thornton found was that the perception of value has changed among Irish consumers. As a result of the recession, as well as the increasing strength of private-label brands, consumers have been content to trade down to lower-priced offers, often store economy ranges. Consumers still expect quality even when trading down however. They are much more savvy and aware, and seek value, even in premium products and ranges.
The amount of money spent on food as a proportion of total household spend has been on a downward trend for 30 years. The results of the latest Household Budget Survey (HBS) 2009-2010 reflect a worrying tend for the food industry in Ireland: many households are saddled with a multitude of household expenses which are limiting the percentage of income they can spend on food, alcohol, restaurants and hotels. Consumers want things to be cheaper and are becoming more frugal and fastidious with their purchasing decisions.
Despite food price inflation, shoppers are managing their shopping budgets by trading down to private labels, shopping around, shopping to a budget and planning in advance. Four out of five shoppers now believe it is imperative that they shop around. As a result we are making more shopping trips, but average spend per trip has fallen by 3.7 per cent.
The winners of this drive for value have been own-label retailer products. More than 30 per cent of what consumers put in their supermarket basket is now own-brand rather than more established names. According to Kantar, retailers own-label sales increased 1.9 per cent in just 12 weeks up to the middle of July, and Aldi, Tesco and Lidl continue to gain market share.
Sales of private-label/own-brand products are worth an estimated €3 billion in Ireland, with many of the lines produced by well-known manufacturers and sold under supermarket labels. In fact, many manufacturers are choosing to supply private-label products.
Some of the suppliers were at the conference. Killowen yoghurt sells its premium product under its own name and also under Aldi’s Specially Selected label. While it undercuts its own prices in Aldi, it has avoided cannibalising its brand and both are trading strongly.
Grant Thorton recognises the delicate balancing act such producers perform when considering producing an own-label brand: “Conversely, the private label market is potentially attractive. Most multiples and discounters have highly developed channels for exporting; being guaranteed a space on a multiple’s shelves in existing and new high growth markets may be too difficult to resist,” it concludes.
Another trend to emerge from the report was that health is still a key driver of growth in the Irish food sector. There has been a rapid growth in demand for nutritional products ranging from “one of your five a day”, to more functional ingredients that reduce the risk of a number of health-related issues including diabetes, heart disease and obesity. Increasingly, changing nutritional guidelines are leading to a re-engineering of reduced salt, fat and sugar products in the marketplace.
An ageing population demands products that provide real discernible health benefits. Longer working lives and a strong interest in maintaining a healthy active lifestyle is leading to the creation of more products tailored to the needs of these consumers. Over 55s are willing to spend their money on age defence products and energy supplements, and will expect these products to be advertised in a modern and inclusive way.
“Consumers want high-quality healthy food, which is also convenient. There’s no doubt that everyone is feeling the ‘pinch’. This means consumers are no longer ‘cash rich, time poor’ but are mainly ‘cash poor, time poor’,” the report says.
BUYING OWN BRAND, THE TWITTER VIEW:
Hell yes! All basics are own-brand now with the exception of meat and eggs. Ciara McDonnell
Aldi easily makes up bulk of shopping now. Susan Cullen
My wife and I were talking about this the other day. More Aldi/Lidl brands. Except for Fairy Liquid, which nobody does better. Brendan Strong
I buy way more own-brand products. The quality of own-brand has improved markedly in recent years to offer a real alternative. Jack Cantillon
Is Aldi counted as own-brand? Do 90 per cent of it there. Otherwise I buy Tesco Value stuff outside of it. Simon Pierse
Buying way more own-brand stuff. Some good (Aldi bread), some great (Tesco wipes), some awful (coffee). Cian OConnor
Fairy Liquid, McCambridge's Brown Bread and Green Giant corn are the only major brands I've been unhappy to replace. Tom Gleeson
I now do all my shopping at Aldi except Kellogg's Rice Krispies Weetabix, own-brand just isn't the same on these two items. Kelly Slattery
PRODUCT LAUNCH APPS AND QUICK RESPONSE CODES: SAVVY PRODUCERS BRING TECHNOLOGY TO BEAR:
Food producers are creating apps around product launches, and creating quick response (QR) codes that provide information on the provenance of their products, the carbon miles used to get the product from farm to supermarket, how fresh the product is and the story behind the farm the product originated at.
In subways in South Korea, Tesco consumers can scan the products they want on virtual aisles. At Gatwick Airport tired travellers can use their smartphones to scan QR codes next to the product images on walls, enabling the delivery of products to their homes, often by the time they return home from the airport.
On smartphones, customers can download grocery apps to add to their shopping lists and select items at any time. It automatically synchronises with their online shopping basket, allowing them to check-out from any connected device.
The rapid growth of mobile commerce and online shopping is creating an additional sales channel for suppliers. Known as crowd-shopping, sites such as Groupon provide a new means to sell directly to customers at a discounted price, enabling suppliers to capture market data on customers. In the future, online sales channels may provide an alternative to the traditional supplier-retailer sales model.
Consumers are increasingly demanding to know where their food comes from. They want to buy Irish, and are increasingly interested in the story behind the food.
As a means of dealing with the dual challenges of recession and food price inflation, shoppers’ coping strategies have involved purchasing on promotion and switching to private label.
Consumers trading down, coinciding with retailers de-stocking some third party lines while investing in the further development of their own brand, has also led to a dramatic shift in the fortunes of own-labels.