More Storm Clouds on the horizon .... change is not complete and ....
Resistance is futile !!!
We have paused, denied, diverted, deviated, destructed, pivoted, innovated and of course prayed for normal to return.
Keep waiting, it is still not here yet and I am sorry I don't yet see it appearing on the horizon. Change is inevitable and we still have a furlong of heavy change to endure before life hopefully settles ... Some key indicators of why Resistance is futile ....
How food inflation is shaping the shopping habits of price-sensitive consumers.
Let me be very clear the overall spend on food did not change much during the various stages of the pandemic but rather the shift of where the money was being deposited. As our beloved restaurant were forced to close our funds were diverted to retail stores (who loved the increase in cash-flow) and if you felt adventurous to spent your food dollars on food delivery services or pre-packaged meal kits. That was until our restaurant's embraced "take-Out" and you interacted with Skip-The-Dishes, Uber Eats or other delivery services.
However as restrictions are eased or eliminated that nasty element of Inflation has also infected our return to normal recipe it is creating even more change for us to contend with and of course our food channels are trying to out think what the consumer is going to do.
Of course as always the Market will ultimately define the price and the need as consumers look for value before departing with there money.
So the following are a couple of insights from analysts ... what are your thoughts?
The one-third of shoppers who value cost over brand are not necessarily following expected patterns, according to a recent analysis of transaction data by Symphony RetailAI.
Food-at-home prices leaped nearly 12% over the past 12 months, according to the U.S. Bureau of Labor Statistics Consumer Price Index (CPI) data for May, marking the largest 12-month increase in 43 years. Manufacturers, meanwhile, are pushing through their second or third round of price increases in the past year, and weighing at what point consumers will balk.
“We monitor two things that are critical to understand what’s going on from the consumer side,” said Dirk Van de Put, CEO of Mondelēz International during the recent 2022 Bernstein Strategic Decisions Conference. “One is the penetration of our brands, meaning how many households are buying our brands. And second was the average quantity that household buys. Those are two key indicators that know if there is an effect from pricing.
Van de Put said the price increases have had “no effect so far” on volumes, but acknowledged it was “kind of weird.”
“And so that is on one hand good news. On the other hand, it makes us a little bit suspicious,” he said, noting there was “a lot more pricing to come, because we already know that the cost increases we’ve seen this year will be as high next year.”
On a more granular level, however, there are signs consumers are reacting to higher food prices overall in small but significant ways. In an email interview, Josh McCann, head of HQ client delivery and analytics at Symphony RetailAI, shared highlights from his firm’s recent analysis of shopper transaction data. The crux: Price-sensitive consumers are shifting where they shop and what they’re buying, with implications for both food manufacturers and the retailers that stock their products.
What follows is McCann’s responses edited for brevity and clarity.
Overall, how has consumer purchasing behavior shifted in the wake of higher food prices?
JOSH McCANN: During this inflationary period, consumers’ loyalty to the products they buy and to the grocery channel is changing. Symphony RetailAI’s Q1 2022 survey of 550 million transactions across 57 million households in North America and Europe found that the divide between customers focused on price versus those focused on quality is larger than ever before. Price-sensitive consumers specifically faced a $13 price increase for every $100 spent compared to Q1 2020.
The most price-sensitive consumers — approximately one-third of all shoppers — are turning their back on the products they have been loyal to and have traditionally purchased. As a result, if price-sensitive shoppers can find a cost-effective alternative to a brand they typically buy, they will switch to that more affordable product. This could mean a smaller size, a less expensive brand, a private-label alternative, but it appears to be occurring as customers turn to other retailers (i.e., a discount retailer) to manage their budget. This declining shopper loyalty for retail grocery comes with a reduced share of wallet, and this same risk exists for CPGs of losing market share to competing brands and private label.
As recession concerns rise, CEOs are stepping away, even they are tired of managing and navigating change
U.S.-based CEO changes rose 22% from April to May, climbing to 150 departures from April’s 123, according to a June 15 report from Challenger, Gray and Christmas. That number is 52% higher than May last year and reflects ongoing upheaval in U.S. business leadership.
668 CEOs have departed this year, the “highest January-May total since the firm began tracking monthly CEO changes in 2002,” the release said.
“The CEO exodus continues. Economic conditions, rising inflation, and recession concerns are making boards rethink leadership and leaders rethink if they want to take on these challenges,” said Senior Vice President of Challenger, Gray and Christmas, Andrew Challenger, in a statement.
Further Insight:
The restaurant industry has also seen significant CEO turnover within the last year, with Darden, Red Robin, Denny’s, Brinker and Starbucks announcing their CEOs were retiring after navigating their companies through the pandemic for over two years. Wingstop and Red Lobster’s CEOs left for positions at other companies, adding to the turnover noted by Challenger.
The previously recorded high of CEO departures by Challenger was in 2019 – also the last time U.S. economists saw a potential recession on the horizon. Amid high inflation and rising recession concerns, company leadership may be preparing for difficult times after a few years of staggering change.
In the short term, HR leaders may need to prepare for potential layoffs, economists have warned. Communication is key in such situations, as employees will rightly be worried about what such situations will mean for them, sources told HR Dive in 2019. Ensure layoff policies – criteria involved in making the decisions, who those criteria may most impact and the question of severance – is clear. And be ready to communicate those factors, they said.
Companies not worried about layoffs may still need to take another look at compensation as inflation looms. While it is not currently advised to factor inflation into compensation budgets, it may still affect a company’s healthcare spending as well as prompt “off-cycle” comp changes, experts said during a Mercer panel in May. Mid-cycle reforecasting of claims as well as transparency about changes for employees may be key to keeping afloat and keeping talent on board, they noted.
In the long term, employers may want to ensure company policies are prepared to weather any storms. For many, this involves some form of flexibility; a shift to hybrid work, especially, will require a thoughtful approach, sources previously told HR Dive – but it could be key to keeping people invested in a company during hard times.
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