Table of Contents
Introduction
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- Definition
- Abbreviations
Executive Summary
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- Food inflation in context
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- Figure 1: Consumer Price Index comparison of the 12 month percentage change to January 2010 and to January 2011
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- Figure 2: Indexed inflation trends, Jan-April 2011
- Factors causing inflation
- Market factors
- Global commodities fluctuate
- Companies, brands and innovation
- Discounting and private-label portfolios are key selling points for retailers
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- Figure 3: Trends in premium and economy claims as a proportion of total new product launches, private-label and branded, January 2007-May 2011
- Managing cost increases
- The consumer
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- Figure 4: Level of concern regarding the impact of selected issues on my finances in the coming year, March 2011
- High level of awareness that food prices have risen
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- Figure 5: Perception and level of concern regarding changing food prices, over the last year, March 2011
- Reactions to rising prices
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- Figure 6: Reactions to a rise in the cost of the weekly shop, March 2011
- What we think
Issues in the Market
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- How worried should consumers be about rising food costs?
- Is rising global demand the key determinant in food price rises?
- How vulnerable are brands to consumer down-trading due to rising costs?
- To what extent are supermarket promotions shielding consumers from rising food costs?
Future Opportunities
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- Carnivore, herbivore…locavore
- Retired for Hire
Rise of the Bargain-Hunter
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- Key points
- Families in the firing line
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- Figure 7: Trends in agreement with selected lifestyle statements, according to % point change, 2006-10
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- Figure 8: Emotional response to brands, February 2011
- Bargain-hunting encourages brand promiscuity
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- Figure 9: Trends in attitudes towards brand trust and loyalty, 2006-10
- Weighing costs vs social benefits
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- Figure 10: Trends in agreement with selected lifestyle statements, 2007-10
- Organic sales down
- Sustainable seafood out-performs other green goods
- Fairtrade flourishes under fire
Food Inflation in Context
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- Key points
- Britain enters a new phase of austerity
- Career prospects take a dive
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- Figure 11: Number of unemployed, January 2008-January 2010
- Consumer sentiment
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- Figure 12: Change in financial situation over the last year, December 2010
- Rising energy and food prices are the main source of inflation
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- Figure 13: Retail Price Index and Average Earnings Index, March 2007-July 2010
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- Figure 14: Consumer Price Index comparison of the 12 month percentage change to January 2010 and to January 2011
- Household expenditure on food
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- Figure 15: Increase of household expenditure, per week, on food and drink, UK, 2005-09
- Energy prices reach new highs
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- Figure 16: Monthly UK petrol diesel and oil price trends, Indexed (Jan 09 = 100), Jan 2009-April 2011
- Figure 17: CPI detailed figures for 15 March 2011
Factors Causing Food Price Inflation
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- Key points
- Key drivers of domestic food prices are commodity prices, energy costs and the dollar-sterling exchange rate
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- Figure 18: Monthly food prices, US $ per tonne, Jun 2006-Dec 2010
- Latest figures reveal that the upward pressure on prices is not abating
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- Figure 19: Indexed inflation trends, Jan 2010-April 2011
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- Figure 20: UK food price rises, February 2010 to February 2011
- Reasons for commodity increases
- The cheap food crisis
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- Figure 21: Chart listing some of the primary factors in international trade which contribute to local food price inflation
- Focus on coffee – rising global demand means importing cheap coffee beans is now over
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- Figure 22: Annual percentage change in RPI (Retail Price Index) for coffee and other hot drinks, 2000-10
- Focus on bakery – global wheat shortages have pushed up the average price per tonne
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- Figure 23: UK commodity price of cereals, January 2004-November 2010
- Focus on chocolate – cocoa prices continue to rise
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- Figure 24: Monthly averages of daily prices per tonne, cocoa, January 2005-January 2011
- Focus on meat – red meat comes under pressure from inflation
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- Figure 25: Retail Price Index of red meat and competing food items, 2005-09
- Focus on olive oil – olive oil enjoys a period of stability
- Precarious outlook for the year ahead
Brand Response to Heightened Price Sensitivity
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- Key points
- Global fmcg companies warn of price increases to come
- It’s crunch time – brand pricing strategies
- Passing on prices
- Reduced pack size
- Sharing packs
- ‘Round pound’
- Price-marked packs
- ‘Extra free’ packs
- Brands show they can compete in the economy drive
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- Figure 26: Five-year trends in premium and economy product claims – UK food and drink, 2006-11*
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- Figure 27: Recent examples of ‘economy’ claims on packaging, by brands, 2011
Retailer Strategies
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- Key points
- Intensely competitive grocery arena
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- Figure 28: Examples of selected major retailers’ competitive strategies during 2010-11
- Discount strategies resonate with consumers
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- Figure 29: Preference for price promotions, September, 2010
- VAT increase inspires ‘buy now, save later’ campaigns
- ATL activity stepped up in 2007/08 and again in 2010
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- Figure 30: Adspend by top ten supermarkets in the UK food and non-alcoholic drinks market, 2006-10
- Figure 31: Adspend by top four supermarkets in the UK food and non-alcoholic drinks market, by category, 2010
- Private-label development is another cornerstone of retailers’ growth strategy
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- Figure 32: Trends in premium and economy claims as a proportion of total new product launches, private-label and branded, January 2007-May 2011
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- Figure 33: Examples of economy launches, by private-label brands, 2011
- Figure 34: Examples of premium launches by private-label brands, 2011
- Growth categories for private-label
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- Figure 35: Change in share of private-label in new product launches, by product category, 2007-10
- Enthusiasm for private-label expected to persevere
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- Figure 36: Expected changes in purchase patterns of food and non-alcoholic drinks in the next 12 months, January 2011
- Usage of hard discounters has stabilised over the last couple of years
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- Figure 37: Hard discounter usage, 2003-10
Consumer Changes in Shopping Habits
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- Key points
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- Figure 38: Ways in which shopping habits have changed in the last 12 months, March 2011
- The 80:20 rule
- Feeding a family is a strong incentive to economise
- Bargain hunt
- Changing multiples, changing attitudes
- Private-label comes into its own
- Convenience and luxury falls to frugality
- Good housekeeping
- ABC1s are also cutting back
Consumer Financial Concerns in 2011
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- Key points
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- Figure 39: Level of concern regarding the impact of selected issues on my finances in the coming year, March 2011
- Fuelling concerns
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- Figure 40: Repertoire of concerns regarding the impact of selected issues on my finances in the coming year, March 2011
- 35-44 – a threshold of anxiety
- Women feel the weight of responsibility on their shoulders
- Security breeds content
- London the transport hub
- Mood of austerity is taking its toll
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- Figure 41: Repertoire of level of concern regarding the impact of selected issues on my finances in the coming year, March 2011
Consumer Perceptions of Rising Food Prices
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- Key points
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- Figure 42: Perception and level of concern regarding changing food prices, over the last year, March 2011
- The only way is up
- Smart shoppers or secure shoppers?
- Families follow the promotions
Consumer Reactions to Price Increases
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- Key points
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- Figure 43: Reactions to a rise in the cost of the weekly shop, March 2011
- A resistant few
- Brand sacrifice
- Cut backs
- Food on the cheap
- Families prepared to vote with their feet
Targeting Opportunities
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- Key points
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- Figure 44: Target groups, March 2011
- Bargain Hunters (31%)
- Who are they more likely to be?
- Changes to grocery shopping habits
- Financial outlook
- Planned cost-cutting strategies
- Stockpilers (10%)
- Who are they more likely to be?
- Changes to grocery shopping habits
- Financial outlook
- Planned cost-cutting strategies
- Doom and Gloom (21%)
- Who are they more likely to be?
- Changes to grocery shopping habits
- Financial outlook
- Planned cost-cutting strategies
- Don’t Worry Be Happy (37%)
- Who are they more likely to be?
- Changes to grocery shopping habits
- Financial outlook
- Planned cost-cutting strategies
Appendix – Food Inflation in Context
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- Figure 45: Household expenditure, per week on food and drinks in the UK, 2005-09
- Figure 46: Household expenditure, per week on food and drinks in the UK, 2009
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Appendix – Retailer Strategies
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- Figure 47: Adspend by major supermarkets in the UK food and non-alcoholic drinks market, 2006-10
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Appendix – Consumer Changes in Shopping Habits
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- Figure 48: Most popular ways in which shopping habits have changed in the last 12 months, by demographics, March 2011
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- Figure 49: Next most popular ways in which shopping habits have changed in the last 12 months, by demographics, March 2011
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- Figure 50: Other ways in which shopping habits have changed in the last 12 months, by demographics, March 2011
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Appendix – Consumer Financial Concerns in 2011
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- Figure 51: Level of concern regarding the impact of selected issues on my finances in the coming year, March 2011
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- Figure 52: Level of concern regarding the impact of selected issues on petrol/diesel prices in the coming year, by demographics, March 2011
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- Figure 53: Level of concern regarding the impact of selected issues on home energy bills/costs in the coming year, by demographics, March 2011
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- Figure 54: Level of concern regarding the impact of selected issues on food prices in the coming year, by demographics, March 2011
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- Figure 55: Level of concern regarding the impact of selected issues on other utilities in the coming year, by demographics, March 2011
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- Figure 56: Level of concern regarding the impact of selected issues on mortgage costs in the coming year, by demographics, March 2011
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- Figure 57: Level of concern regarding the impact of selected issues on job security in the coming year, by demographics, March 2011
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- Figure 58: Level of concern regarding the impact of selected issues on my health in the coming year, by demographics, March 2011
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- Figure 59: Level of concern regarding the impact of selected issues on ‘Commuting costs (excluding petrol, diesel but including public transport)’ in the coming year, by demographics, March 2011
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- Figure 60: Level of concern regarding the impact of selected issues on personal debt in the coming year, by demographics, March 2011
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- Figure 61: Level of concern regarding the impact of selected issues on inflation in the coming year, by demographics, March 2011
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- Figure 62: Level of concern regarding the impact of selected issues on interest rates in the coming year, by demographics, March 2011
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- Figure 63: Repertoire of level of concern regarding the impact of selected issues on my finances in the coming year, by demographics, March 2011
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Appendix – Consumer Perceptions of Rising Food Prices
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- Figure 64: Perception of changing food prices, over the last year, by demographics, March 2011
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- Figure 65: Level of concern regarding rising food prices compared to one year ago, by demographics, March 2011
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Appendix – Consumer Reactions to Price Increases
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- Figure 66: Reactions to a rise in the cost of the weekly shop, by demographics, March 2011
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- Figure 67: Reactions to a rise in the cost of the weekly shop, by level of concern regarding rising food prices compared to one year ago, March 2011
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Appendix – Targeting Opportunities
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- Figure 68: Ways in which shopping habits have changed in the last 12 months, by target groups, March 2011
- Figure 69: Level of concern regarding the impact of selected issues on my finances in the coming year, by target groups, March 2011
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- Figure 70: Perception of changing food prices, over the last year, by target groups, March 2011
- Figure 71: Level of concern regarding rising food prices compared to one year ago. by target groups, March 2011
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- Figure 72: Reactions to a rise in the cost of the weekly shop, by target groups, March 2011
- Figure 73: Target groups, by demographics, March 2011
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