Circana (formerly IRI and The NPD Group) has this week published its first FMCG Outlook Report for the Australian market 2024. The report shines light on shopping habits that continue to be shaped by a mix of inflation, cost of living pressures, and post-pandemic recovery.
According to the report, some of the trends that first emerged in 2023 have continued to develop in Q1 2024, albeit with certain changes in focus.
“In 2023, the top driver for consumer spending was value. In 2024, while value is still a top priority, Australian shoppers are not just looking for the lowest cost but for more,” said Alistair Leathwood, Circana’s Head of Media, Insights and Analytics for Asia Pacific.
“They’re looking for promotions to drive the consumerism because the overall quality of products is already at a high level and gives shoppers confidence that the baseline for any given product is high.
“In an economic climate trending towards disinflation, the idea of value is changing as people search for everyday experiences and little luxuries as a form of escapism.”
While the Circana report is not alcohol specific, the purchase of premium alcohol as a non-essential luxury item is a perfect candidate for this observed change in mentality. While customers in general are reducing their average spend and shopping down to more affordable product alternatives, the current market climate presents an opportunity for retailers to capitalise on luxury and entertainment purchases.
“The extent of the pandemic hangover cannot be underestimated as is clearly shown by the strength of the ‘funflation’ trend,” said Leathwood.
Funflation is a term that has been popularised by US economics to explain certain surprises in consumer spending, especially in relation to the post-pandemic growth of expensive experiences such as indulging in premium alcohol and fine dining.
“With big spend items like overseas travel still off the books for many Australians, these consumers are showing a willingness to spend to seek joyful distractions on things like Taylor Swift concert tickets” said Leathwood.
“Shoppers are more actively seeking out value and modifying their behaviour to incorporate little luxuries into their shopping journey.”
Despite this consumer propensity for seeking luxury and entertainment experiences, the Circana Outlook Report estimates that the robust gross sales growth across all retail in 2023 will be reduced in 2024 as margins squeeze amid lower retail profitability.
According to the report, 2024 will see 45% of Australians give up their favourite brands to save money (up 19% since 2021), 40% reduce their use of new products (up 7% since 2021), and 73% compare brand prices before making a final choice (up 3% since 2021).
“With this in mind, the meaning of value is starting to evolve, as Australian shoppers experience inflation fatigue and begin to search for something to lift them out of the ordinary,” said Leathwood.
“At the grocery store, shopping trends indicate that Australians are looking elsewhere than just ‘everyday low prices’ and are instead seeking out promotions to add value to their trolleys.
“When the quality of a product is consistently good, then Australians are looking for more than just a low price, and the current trend indicates that shoppers now value promotions and special offers rather than price consistency.”
