With inflation making headlines and setting in across APAC, how are consumers changing their purchasing habits for food and drinks? According to the latest consumer survey data from Mintel, a London-based market research firm, 47% of Singaporean consumers are seeking to save money on food and drinks by visiting stores with cheap prices. With higher costs and supply shortages, F&B brands are increasingly threatened by better value-for-money competitors and are hesitant to be transparent about their price increases. 

To find out more about consumer’s purchasing habits in the currently uncertain F&B sector and on how industry players should react to maintain brand loyalty, Elliott Danker spoke to Cormac Henry, Global Food & Drink/Purchase Intelligence Analyst, Mintel on The Breakfast Huddle.

Elliott Danker: Let's talk consumer research. Tell us a little bit more about this global consumer research. What was the focus in the methodology here? 

Cormac Henry: Of course. For our consumer research, we surveyed consumers across 35 different markets across the globe. Throughout our inflationary studies, we were really looking towards how consumers’ spending patterns have changed regarding F&B and that was obviously different coming out of Covid. We did see a lot of consumers that have gone straight towards foodservice. But, with headlines around inflation and consumer concern around that, we are seeing about 41% of Singaporean consumers spending less on food at restaurants, and about 44% spending more on food for eating at home. So, there really is this emphasis on providing value for the consumer, making easier choices for them. 

Elliott: It must be quite interesting as Mintel is London based and when we see the inflation hit, reactions across are so different. In the UK, people are fighting for a higher pay but here it's really about your in-home consumption habits. Are we seeing food and drink customers dialing back on, perhaps, ordering out as well? Or are they doing more grocery shopping instead, keeping it more long term in that sense? 

Cormac: Yeah, I think it's a real spectrum. When it comes to foodservice, it is broadly seen as a treat. With inflationary pressures, it can come down to perhaps saving “treat time” for a special occasion or perhaps changing how you're shopping in those foodservice moments. One example of a category that tends to be relatively resilient when there is a bit of an economic downturn is coffee. That's sort of seen as a treat which can be made more affordable. So, consumers may go in and order a smaller coffee or perhaps downgrade their order to a less expensive brew like a cold brew over the standard sort of Long Black or Americano. In terms of in-store shopping behaviours, from our recent survey, we've seen a massive 53% of Singaporean consumers say they will take advantage of sales to stock up, that they will switch to a store with cheaper prices or even that they will buy more store-brand products. I think the message there for F&B brands really is that brand loyalty, to some extent, is off the table. It's really important to be communicating your value proposition to consumers, as now they are willing to shop around and almost become a destination shopper. They’ll go to different stores based on offers available that week for example. So, marketing becomes really, really important in communicating what you are doing to consumers. It's perhaps not a great time to be going totally quiet on your media or innovation. That may not serve you very well in the longer term.

Elliott: It's great that you’ve talked about how businesses shouldn’t hold back on their marketing to educate and advertise. But are house brands doing enough? Because at the end of the day, sometimes these house brands are using the same factory as premium brands and as a consumer, if I knew about it, I wouldn't mind. 

Cormac: Let’s take this back to the basics of shopping for F&B – the two factors which remain constant despite an economic downturn, are that consumers will shop for 1) nutrition and 2) enjoyment/indulgence. These are two pillars that private label brands are really well placed to innovate on, because to consumers, they can appear slightly more special than your basic private label option, while still offering quality, taste and even indulgence cues at a lower price than a big brand competitor. So, I think there's a lot of opportunity out there for private label brands and looking back at previous economic downturns, we did see a lot of private label brands, particularly across Europe, really increase their market share during this period of economic uncertainty.

Elliott: How much of these purchasing habits have changed because of inflation in-store? Are enough people aware of it or is it out of fear of general economic uncertainty where consumers go, “I'm reading in the news that maybe there'll be another Covid surge or that there's a war in Ukraine, so it’s better to stock up!”?

Cormac: Yeah, there's an element of uncertainty driving some of these trends, but I actually realised that we're very fresh off the back of those scenes in supermarkets, where people are stockpiling various food items. We are seeing headlines about shortages due to containers not being able to get shipped in or due to staff shortages in the supply chain. It's pretty natural that consumers would have this type of reaction so this definitely points to them preparing for that rainy day or that shortage when it comes, as opposed to there actually being a very real risk of that. I think that's just because it's quite fresh in consumers' minds. That's why it's important for brands and retailers to be ensuring consumers that there is surety in their supply chains and that stock is coming with. We’ve seen quite a lot of supermarkets do that in recent times, to stop that sort of surge panic buying, which is not something we want to return to. 

Elliott: I know we're only talking about food and drink but how badly do you see approaching festive seasons like Christmas being affected? Are companies worried about it? 

Cormac: I think there's a little bit of uncertainty amongst F&B brands but what I would say on this is that consumers have always looked forward to the festive season. I guess it serves as a bit of an emotional respite for them as times are tough. There's also a lot of power in these festive occasions in bringing people together. What I would say however, is we're not necessarily going to see consumers this year going out there for their big Christmas shopping trip. For example, it is more likely that those stocks for celebrations are going to be built up over time so that consumers can purchase these “special” food and drink items as and when they can afford them. Therefore, it is important to be activating your seasonal innovation line early so they are there for consumers who may be in the position to purchase them slightly earlier.

Elliott: Let's talk about what F&B players can do. I know we've discussed a lot about building trust and assurances. What else do you think they can do as they try to tell customers that they have good value here? 

Cormac: Yeah, it's really taking it back to the two pillars on food and drink that we know are resilient to the onset of economic downturns - for nutritional purposes and for sheer indulgence and enjoyment. Riding the nutrition element, it would be talking up your nutritional content - high fibre, high protein and also the versatility of certain items so consumers are aware that they provide good value and they can provide nutrition across a number of dishes. Basic items like rice, poultry play really well in that space. On the indulgence side of things, we know that this is a time when consumers will be comfortable eating. Companies should really link their offer into that indulgence space. A link to home entertainment is also really important too. I have definitely, over the course of the lockdown, had binge chocolate sessions in front of popular streaming services. Those sort of brand tie-ins with the home entertainment base and indulgence base offer lots of opportunities to really develop a stronger emotional connection with your food and drink consumer.

Listen to the full podcast on Awedio: SPH's free digital audio streaming service, as Cormac Henry shared more on why it is more important than ever for F&B players to be transparent with price increases. 

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For more, tune in to The Breakfast Huddle on weekdays from 6AM to 9AM.
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This interview was broadcasted on MONEY FM 89.3 on 20 July 2022.

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