The economic turmoil that reached crisis level in fall 2008 has been a bull in the china shop of American consumer behavior, even for a market as fundamental as food. Food spending, fueled by price increases but dampened by consumer cutbacks, took on a volatility that matched the chaotic economic trajectories of American consumers. Even within the affluent cohort of upscale-to-affluent U.S. adults ($75K+ individuals; $100K+ households), as of first quarter 2009, nearly a fifth described themselves as significantly worse off than they were a year ago, and nearly a fourth described themselves as somewhat worse off..
Focusing on this upscale-to-affluent U.S. cohort, Affluent Consumers in the New Economy: Food and Foodservice examines how responses to economic turmoil are affecting consumer demand for food products and chain restaurant services. Notably, for example, affluent consumers who have taken a financial hit are more likely to shop for organic and natural foods, and are more sensitized to ethical consumerism issues. In addition, affluent consumers whose financial situation has recently worsened or improved show higher levels of health and nutrition consciousness, as well as a keener taste for food adventure. In an era of widespread economic turmoil, such psychographic responses to financial setback and financial recovery will shape and transform consumer spending on food.
The effects of economic turmoil are being seen not only in which types of food products consumers are buying, but in which retail channels and chains they are flocking to. Although affluent consumers remain less likely than the rest of the population to shop at Walmart supercenters, they are shifting to Walmart at above-average rates, making supercenters an ever-bigger part of the equation for marketers of affluent foods. At the same time, shopping patterns for Trader Joe’s and warehouse clubs show the heightened potential for adventurous but value-priced store brands among the affluent cohort.
The effects of economic turmoil are also presenting broadly felt and widely reported challenges to the foodservice industry. Even within the current environment, however, specific segments of affluent consumers are more receptive to healthy fast food and more likely to find that fast food fits their current lifestyles. Therefore, the true task for restaurants is to match supply to demand, rather than to create or maintain it. Successful foodservice strategies must accommodate generationally and regionally inflected economic contexts, food landscapes, nutritional psychographics, and consumer lifestyles.
Overall, consumers who have been set back or thrust forward financially are more likely to be thinking and rethinking about what they need, what they want, and how and where best to find it. For marketing and customer communications, as discussed in this report, more is now more.
Read an excerpt from this report below.Report Methodology
This report is primarily based on original research and analysis. The analysis of affluent consumer trends, demographics, and psychographics derives from custom extraction and cross-tabulation of data collected by Experian Simmons (New York, NY) in its Winter 2008/09 National Consumer Study (fielded from late July 2008 through late March 2009), which is based on 13,128 U.S. adult respondents. In addition, this report draws on recent Packaged Facts consumer market studies, as well as relevant data from various government, business, and trade sources.
Market Insights: A Selection From The Report
Marketing in a Subprime Economy
In a down economy, consumer attention has gone up. As with the parallel case of retail formats, the days when marketing messages commanded a captive audience are long gone, and being cast deeper into oblivion with each turn of the screw in communication technologies. But for the current period, at least, consumers have become more attentive to their spending options, saving strategies, and product choices.
Coupon Use on the Rise
As discussed in Packaged Facts’ December 2008 report, The Couponing Consumer in a Down Economy, coupon use is on the rise. The economic situation has sharpened consumers’ focus on ways to get more value from purchases, and coupons are one tried-and-true method. A 2008 poll by ICOM Information & Communications of more than 1,500 U.S. shoppers found that 89% of respondents were either much more likely or more likely to use coupons in the case of a recession. An August 2008 online poll by Prospectiv of 1,386 consumers found that 72% were using more coupons than they did six months ago, with the economic downturn being the top reason for doing so. A February 2009 online poll of 4,000 nationally representative households by Retail Forward found that 32% of shoppers are using coupons more frequently (retailforward.com), while a May 2009 study of 1,225 adults by Ad-ology Research puts the proportion at 40% (Advertising's Impact in a Soft Economy; www.ad-ology.net). Thus, Inmar CMS Promotion Services data show coupon redemption increasing by 10% in fourth quarter 2008 compared to fourth quarter 2007-the first jump in redemption since the early 1900s (cms.inmar.com).
Affluent Consumers Migrating to the Internet
As discussed in Packaged Facts’ report on The Affluent Market in the U.S. (April 2007), upscale consumers have skewed to something old, something new in media consumption-to newspapers, magazines, and radio on the one hand, and to the Internet on the other. They are less likely to depend on TV as a source of information and entertainment, and more likely to multitask when they do watch television. However, as evidenced by the financial woes of even venerable papers such as the Boston Herald and the San Francisco Chronicle, and by...In the News
Coping with Recession, Premium U.S. Consumers Adjust Demands for Food Products and Restaurant Services
New York, July 13, 2009 - Even among America’s affluent, personal financial trajectories are reshaping consumer spending on groceries and foodservice, according to Premium Consumers in the New Economy: Food and Foodservice, an all-new report by leading market research publisher Packaged Facts.
A keener taste for food adventure, elevated health and nutrition consciousness, stronger preferences for organic and natural foods, a heightened sense of ethical consumerism, and a greater propensity for Internet and coupon use are the new normal for a growing number of upscale U.S. consumers. Such psychographic responses to financial change have reshaped─and will continue to transform─consumer spending on food, according to Packaged Facts.
“The economic turmoil that reached crisis level in fall 2008 has been a bull in the china shop of American consumer behavior, even for a market as fundamental as food,” says David Sprinkle, author of the report. “Consumers who have been set back or thrust forward financially are more likely to be rethinking what they need, what they want, and how and where best to find it.”
Notably, Packaged Facts found that the direction of financial change matters less than the fact of financial change in shaping consumer mindsets. Therefore, premium consumers who have taken a financial hit often align in attitudes and behavior with those on the financial upswing, in contrast to their counterparts whose finances have remained stable.
Packaged Facts defines premium consumers as either single-person households with an income of at least $75,000, or multiple person households with an income of $100,000 or more. The premium cohort accounts for the top 28% of adults, or approximately 61 million out of 222 million adults. As of first quarter 2009, more than twice as many adults in the premium cohort considered themselves worse off (compared with the year before) than considered themselves better off.
Economic turmoil is leveling out the shopping landscape. Premium consumers, though remaining less likely than other consumers to shop at Walmart supercenters, are nevertheless shifting to Walmart at above-average rates. Specific segments of premium consumers (such as Gen Xers) are discovering that fast food, especially in its healthier incarnations, fits well with their current lifestyles. And premium consumers use coupons more, rather than less, than the rest of the population.
Premium Consumers in the New Economy: Food and Foodserviceanalyzes how responses to changing financial circumstances are affecting premium consumer demand for food products and chain restaurant services in the U.S. The report is the latest installment in Packaged Facts’ ongoing examination of consumer responses to the shifting economy. Other reports in this series include American Value Shopper in a Down Economy (June 2008), The Couponing Consumer in a Down Economy (December 2008), and Do-It-Yourself (DIY) Consumers in the U.S.: DIY Markets in a Down Economy(June 2009).
About Packaged Facts - Packaged Facts, a division of Market Research Group, publishes market intelligence on a wide range of consumer market topics, including consumer goods and retailing, foods and beverages, demographics, pet products and services, and financial products. Packaged Facts also offers a full range of custom research services.