Spending Flexibility in Ireland during Inflationary Times
Nielsen’s Inflation Impact Online Survey 2013 revealed that if food prices were to rise, Irish consumers say they would increase price hunting in-store, take advantage of deals by stocking up, reduce number of shopping trips and amount spent per trip, plus shop more in discount stores and look for deals online.
A key measure of buying power is spending flexibility, or the elasticity in the household budget to afford a rise in food prices without having to make difficult spending choices elsewhere. In the survey, Nielsen segmented respondents into three spending capacities;
• THOSE THAT HAD ENOUGH MONEY TO SPEND FREELY
• THOSE THAT WERE ABLE TO LIVE COMFORTABLY
• THOSE THAT JUST HAD ENOUGH MONEY FOR SHELTER, FOOD AND BASICS
For Ireland, the effects of the tough recession are reflected in the survey results, as the majority of Irish respondents report only having enough money for the essentials. 61 percent indicate, in the past year, they have only had enough money for shelter, food and basics (versus global average of 44%, Europe average of 52%). Just under one third of Irish respondents (31%) say in the past year they were able to live comfortably and bought some things just because they liked them. Only 9 percent say they were able to spend freely (versus a global average of 14% and a Europe average of 11%) indicating the Irish household budget is still under pressure.
In terms of elasticity in the household budget, two thirds of Irish respondents (66%) indicate they cannot afford a rise in food prices without making difficult choices elsewhere (ranking 18 out of 58 countries surveyed).
HOW DOES RISING FOOD PRICES AFFECT THE SHOPPING BASKET?
When it comes to rising food prices, nearly everyone feels the pain; 85 percent of all global respondents say that higher costs impact their choice of grocery products. Irish consumers are now shopping around, and also making trade-offs. Categories most vulnerable during inflationary times, and the ones that at least half of Irish respondents say they would buy less frequently were; alcohol, convenience food, soft drinks and confectionery. Three quarters say, on making decisions around buying product categories, if food prices increased, they would be likely to buy less sweets & chocolate (73%), while two thirds indicated less purchasing on crisps/snack foods (67%), food-on-the-go (62%), and for alcohol and carbonated drinks, 58% and 57% respectively.
The more resilient categories for Ireland, where more than half of respondents had no plans to change their shopping routine, were for the staple categories like; dairy products (78%), fresh fruit & veg (64%), meat and poultry (67%), bread and bakery goods (68%), packaged foods (68%) and fish and seafood (58%).
RETAILERS POISED FOR SUCCESS – BEST BET RETAILERS
Many Irish respondents indicate they will continue to shop at Supermarkets and Pharmacy, with 35 percent indicating they would increase shopping frequency at Supermarkets. However, a high 47 percent of Irish respondents say they would shop more at Discount stores in times of rising prices.
BRANDS VERSUS PRIVATE LABEL IN INFLATIONARY TIMES
Some good news is that the majority of Irish respondents report being willing to try new brands. When asked ‘thinking about food brands to buy over the next year’, 56 percent indicate they would experiment with new brands.
However on the flip side, as shoppers increasingly look for value, private-label brands have a potential advantage as shoppers become more discerning and lower-priced alternatives proliferate. 47 percent of Irish respondents say they would buy more private label if food prices increased, compared with only 11 percent saying they would buy more national brands.
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