Consumers have cut back 28% on food at home expenditures this year, which is an increase from a 23% cutback in 2009.
“The new frugality that consumers reported last year — one that requires trade-offs between price, brand and convenience — has become dominant and ingrained behavior in several categories,” said Nick Hodson, partner with Booz & Co. “Consumer products companies and retailers need to monitor and understand the evolving behaviors of different consumer segments and respond to each, category by category. Going back to business as usual is not an option.”
Consumers also are trading down on essentials and switching to less expensive brands with 37% of consumers trading down on food at home.
Only one-third of consumers expect their financial situation will improve during the coming year, and even optimistic consumers show little evidence of increasing spending. Less than 10% of all optimistic consumers who were surveyed planed to trade up in brands, and only 15% plan to spend more in discretionary categories.
“Consumers continue to pay down debt and build up their savings,” said Marcelo Tau, principal at Booz & Co. “There is little reason to believe consumers will give up their frugal behaviors in the short term. Consumers remain cautious, especially following their disappointment with the slow pace of improvement over the past year.”
Private label penetration in the supermarket has grown from 15% before the recession to more than 18% of total sales in 2010. As the economy improves, private label sales are expected to remain strong, and branded consumer packaged goods may find it difficult to regain lost market share.