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1、Mintel consumer and category experts discuss how brands can provide consumers with what they currently want,while also maintaining the innovation pipeline to easily pivot once spending rebounds.The cost-of-living crisis:How brands can support consumers now,while also preparing for future prosperity
2、Experts in what consumers want and whyConfirmation that the Eurozone slipping into a technical recession in the first quarter of 2023,highlights the ongoing impact of the conflict in Ukraine and the cost of living crisis on economies across the world.But its important to put that news into a broader
3、 context.Eurozone GDP fell by 0.1%in Q1 2023-a change so small that it is only really noteworthy because of the symbolic importance of the“recession”word.Whats much more important is the fact that most economists still expect economic output to grow slightly in 2023 and then more strongly in 2024 ac
4、ross the Eurozone.The short-term prospects for Germany and the UK are slightly less positive,but even in those markets no one is expecting anything close to the falls seen after the financial crisis.Toby Clark,Director of Research,EMEAMost European economies are expected to grow slightly in 20232.72
5、.61.83.75.540.80.7-0.10.71.5.41.71.31.10.821EuropeFranceGermanyItalySpainUKAnnual GDP growth(%)GDP forecast,key European economies,20242Consumer confidence has recovered from its 2022 low pointAcross every market,consumers confidence in their financial prospects fell sharply throughou
6、t 2022.They are still worried about their financial prospects,but there are encouraging signs that they believe that the worst is over.Inflation is still likely to be well above target Although prices are still rising more quickly than wages in most markets,there are signs that the income squeeze is
7、 finally starting to ease across Europe.Food inflation remains high,but energy prices have peaked and should start to fall in most markets.However,inflation is still expected to be well above pre-crisis levels throughout 2023 and 2024.In the UK,concerns over core inflation mean that the Bank of Engl
8、and will almost inevitably increase interest rates further,adding to peoples mortgage and credit card costs.And its important to remember that inflation just measures how quickly prices are rising.Even if inflation dropped to 0%tomorrow,it wouldnt mean that prices have fallenjust that they have stop
9、ped increasing.5.98.78.78.39.15.06.24.54.36.82.53.12.63.23.0FranceGermanyItalySpainUnited KingdomAverage increase in consumer prices across the year(CPI measure,%)Inflation forecast,key European economies,2024290223232529222863312
10、44618202319GBPolandItalyGermanyFranceSpain%of respondentsEurope:I feel pretty confident that my finances will be OK,by market,2022-23Mar-22Apr-22May-22Jun-22Jul-22Aug-22Sep-22Mar-23Apr-23May-233Even when GDP increases,consumer sentiment will take years to recover Ana
11、lysis of Mintel consumer confidence data shows that it takes at least six months for changes in GDP to feed through into consumer confidence.Changes in inflation hit quicker but have a less significant and shorter-lived impact on confidence.UK consumer confidence vs GDP,2009-2013Getting the balance
12、right:What winning brands will do An economic recovery will inevitably change what consumers want from brands,but timing is crucial.If a change happens too early,brands risk looking insensitive;too late,theyll miss out on the opportunities that a rising market will inevitably offer.Winning brands ar
13、e the ones who get the balance right between meeting what consumers want currently,while simultaneously doing the work in the background on innovation-so theyre ready to pivot seamlessly when consumers are confident enough to loosen the purse strings again.Brands that get this balance wrong risk los
14、ing out to rivals who are better positioned to tap into improving consumer mindset.Winning brands are the ones who get the balance right between meeting what consumers want currently,while simultaneously doing the work in the background on innovation.Four key ways consumer spending will shift Mintel
15、 has been analysing consumer trends for the last 50 years.There are several behavioural shifts that weve seen time and time again during periods of financial strain.Weve also seen how these behaviours evolve once confidence starts to pick up.Here are four key ways we think consumers attitudes toward
16、s spending will shift when the European economic recovery begins.Theres no escaping the fact that some consumers are being forced to cut back,while even those who are doing okay are still changing the way they shop.In a cost-of-living crisis,discounters and private-label products are always going to
17、 thrive.Consumers have spent the last few years delaying big-ticket purchases.As confidence returns and people feel more secure,the upgrade cycle will start to pick up speed.Essential,but unglamorous,products like domestic appliances including refrigerators or washing machines,tend to be the first h
18、it when budgets are under pressure.However,theyre also the first to benefit when consumer spending starts to recover.01 From strict budgeting to big-ticket spendingNOW:Making the most of consumers spending powerNEXT:A bigger focus on big-ticket purchases 502 From safety first to more experimentation
19、 From everyday indulgence to a more lighthearted spending approach From value with values to paying extra for products making positive social impact During an income squeeze,efficacy and functionality move up the list of priorities.Nice-to-haves are a luxury in tough times.Consumers can also be relu
20、ctant to experiment as they become more likely to stick with familiar products that they know will deliver on quality and efficacy.This safety-first approach can help established brands fight back against challengers and private-label.As the economy recovers,consumers will be more willing to experim
21、ent with exciting new brands,products and concepts.After the Global Financial Crisis,legacy brands were caught off guard by a wave of disruptive innovation from startups,which coincided with greater willingness from consumers to gamble on new products,creating major challenges for legacy brands.NOW:
22、Functionality and efficacyNOW:Everyday indulgence NOW:Value with values NEXT:A renewed appetite for experimentationNEXT:Fun and frivolity move back up the agendaNEXT:Spending for social impact The lipstick effect is a clich for a reason.Whatever a consumers financial position,they still need an esca
23、pe from the gloom.At the upper end of the market,prestige brands can certainly capitalise,but even at the value end,theres always a role for indulgenceincluding a luxury ready-meal instead of a night out or premium skincare products.When consumers are struggling to pay the bills,issues like sustaina
24、bility and social responsibility tend to move to the background.They dont disappear altogether,but value and functionality need to be locked in before broader factors can come into play.The winning proposition is to combine value with valuessaving money and the planet.During tough times,conspicuous
25、consumption looks crass.However,when spirits lift theres much more room for frivolity.As the economic recovery picked up after the Global Financial Crisis,we saw a greater emphasis on products that had fun as the chief selling point.This included lobster and gold flake-topped takeaway,with the mood
26、going from serious to playful and bold.When moneys tight people look for efficacy and value first.Value and functionality will always be at the core of a products appeal,but when people are feeling better off theyre more likely to be prepared to pay a little more for products and experiences that th
27、ey believe will have a positive social impact,and support the causes they care about most.03046Based on Mintels latest consumer data,industry knowledge,and experience guiding companies through previous periods of economic and consumer recovery,our team of experts have examined how brands can best pr
28、epare themselves to tap into the recovery in consumer confidence and subsequent spending.Theyve analysed how their particular category of expertise has fared during the cost-of-living crisis,shared their predictions for the next couple of years and offered their picks for products or services they f
29、orecast will take off once spending confidence returns in four critical categories:If youre a Mintel client and want to learn more about our recommendations for how brands should prepare for the future,please speak to your Account Manager.If youre not a Mintel client,visit the Mintel Store to buy Eu
30、ropean consumer and economic research today.Otherwise,wed love to hear from you so please get in touch.7Food and DrinkThe past year will be remembered as an era of trading down in food and drink categories.Eye-watering food inflation of 16.6%*in the EU and 19.1%*in the UK,driven by high energy costs
31、,global supply-side shortages(such as wheat),alongside rising suspicions of greedflation hit shopping basket budgets hard.In particular,food staples of the Western diet like cheese and bread were dramatically impacted,exemplified by the Italian governments emergency summit over rising pasta prices.U
32、ltimately,unsustainable price hikes made consumers more financially savvy in their choices:sausages instead of steak,less dining out/takeaways but more scratch cooking,and value own-label foods over branded ones.Whilst the food and drink market is,and will largely remain recession-proof,consumers em
33、phasis on cost will vary in economic ups and downs.Currently,high-value-for-money foods are thriving.Valentin Thies,Associate Director,Mintel Food&Drink-Germany*Source:ec.europa.eu and ONS.April 2023,compared to the previous 12 months;UK figure includes non-alcoholic drinks and food.8Coffee:An indis
34、pensable category regardless of the economyThere is still room for daily indulgence,however.Coffee,in particular,passed the stress test of recent times,as it did in the 2007-09 recession.Over four in five French,German and Italian consumers drank coffee in 2023 and only one in ten coffee buyers say
35、would buy less coffee to save money on it at home.Instead,European coffee buyers*opt for promotions,larger packs or own-label coffees when the purse strings are tightened.Whilst coffee seems non-essential at first glance,the category stacks up a unique set of tangible benefits,making it indispensabl
36、e for many.In a post-COVID era of chronic crisis mode,both the at-home and out-of-home coffee experiences provide a much-needed core ritual that embodies stability,slowing down and self-care.This treat effect,combined with coffee being an antidote to Hyper Fatigue makes the category attractive despi
37、te strong economic headwinds.Next year,more prudent,planned spending and less impulse buying are likely to persist in food and drink purchases with budgets still under pressure.Core food items,such as fruits and vegetables,will be found more in shopping baskets;whilst satellite items,including ready
38、 meals,will still be a harder sell.For instance,51%of UK consumers state if money is tight,fruits/vegetables would be considered a high priority and,for 12%,a low purchase priority,which is the reverse for ready meals at 9%and 42%.Considering that one in two European*food/non-alcoholic drink buyers
39、say buying own-label products makes them feel like a shrewd shopper,own-label goods are likely to benefit further from this crisis.This is backed by recent history.After the financial crisis of 2007-08,European private-label share of launch activity skyrocketed from 18%of all food/drink launches in
40、2007 to 30%in 2011,driven by the growth of discounters and their investment in innovation.This level has been sustained,and in 2024 a new record high for private-label European food and drink launches could be set.*European buyers include:German,French,Italian,Spanish and Polish consumers.9Mass-tain
41、ability will rise in prominence when consumer confidence returnsThe return to more spending confidence will mark an era of mass-tainability for food and drink,bringing sustainability to the massesfuelled by high levels of eco-anxiety.The financially healthy,eco-conscious Europeans*will splash their
42、cash on a new,second wave of branded,premium-priced sustainable foods,including new dairy/meat alternative formats(eg skin on no-chicken breasts),foods with upcycled ingredients(eg spent grains)and ones made with novel technologies(eg precision fermentation).At the same time,the sleeping retail gian
43、ts have awakened in their sustainability journey.A rapidly growing number of own-label sustainable,yet affordable food ranges(eg REWEs#umdenkbar marketing campaign showcasing its sustainability efforts by enabling its customers to shop for affordable food while also doing something for the climate)w
44、ill be attracting a vast,untapped cohort of half of Europeans*who dont always choose to buy foods/drinks with sustainable claims due to them being too expensive.This democratisation will be further catalysed by major policy initiatives such as the European Green Deal.*European buyers include:German,
45、French,Italian,Spanish and Polish consumers.10RetailIn the twelve months to March 2023,the value of retail sales averaged growth of 8.7%across the EU,while in the UK sales were up 4.1%.However,inflation was the driver of much of this growth,with customers significantly cutting back and volume sales
46、down 0.9%in the EU and 5.1%in the UK.Volume declines have worsened across Europe as inflation has built.In Q1 2023 volume sales were down 2.8%in the EU,and grocery volumes were down 5.2%as inflation soared in food and drink.Of the big five European economies,Germany(-6.5%)and the UK(-4.3%)have seen
47、the deepest declines in volume sales in Q1,backing up the significant numbers of consumers across our European data who say they are being impacted by rising food and drink prices.Nick Carroll,Retail Category Director,Mintel Reports EMEA11Boost to value and discount retailers Across Europe,the story
48、 in the grocery sector has been one of trading down to value retailers,and,in particular,the food discounters.For example,71%of Italian grocery shoppers and 73%of Spanish grocery shoppers say they have moved some of their shopping to discounters as a result of rising costs of living.The recently rel
49、eased results from Schwarz Group,owner of Lidl and Kaufland,back this up with sales up 15.4%in the year to February 2023 to 154.1 billion.However,in those markets that were most disrupted by the discounters rise following the Global Financial Crisis and the Eurozone crisis,many leading domestic play
50、ers were better prepared to meet both Aldi and Lidl head-on for value than was the case in 2008-10.The various tactics deployed are having a material impact on customer retention.In the UK,44%of Tesco shoppers and 42%of Sainsburys shoppers say that their respective Aldi Price Match schemes have stop
51、ped them from switching to discounters.Similarly in France,significant work has gone into reinvigorating loyalty schemes as 72%of members of Carrefours loyalty programme said the deals available via schemes have become more important to them in the past year.It is critical retailers continue to clea
52、rly communicate to shoppers what they are doing to mitigate the impact of inflation,and why prices are rising,as there is a significant feeling across Europe that companies are profiting from inflation with 88%of UK consumers,89%of Italian and 89%of Polish consumers saying that some companies are ju
53、st using inflation as an excuse to raise prices.In non-food the picture is more mixed,but the overarching trend across Europe has been of higher-ticket categories,such as home and electricals,suffering while lower-ticket categories,and those which underperformed during the peak of the pandemic,have
54、performed best,such as beauty and fashion.There has also been significant growth in peer-to-peer and marketplace shopping,as consumers both look toward value purchasing alternatives and raise cash.89%of Italian consumers say that some companies are just using inflation as an excuse to raise prices 1
55、2Indeed,in the UK 44%of consumers have sold products online in the past year with 61%of them saying they have sold more products online in the past year due to the rising cost-of-living.Interestingly,those aged 35-54 are most comfortable selling online,and it was those shoppers 10-15 years ago that
56、drove the growth in e-commerce peer-to-peer sales after the financial crisis.Platforms such as Depop and Vinted are introducing a whole new audience to selling online,and this current period of heightened use will leave a long-term legacy of heightened peer-to-peer behaviour in the market.There has
57、also been significant growth in peer-to-peer and marketplace shopping,as consumers both look toward value purchasing alternatives and raise cash.Value will be high on the agenda for the coming year,but as we enter a second year of financial pressure there will be significant opportunities for retail
58、ers across sectors to support consumer wellbeing through this period.In fact,74%of Polish,52%of Spanish,and 49%of German consumers say that high inflation is having an impact on their mental wellbeing.In FMCG-focused retailers,this means a significant opportunity to continue to lift moods with lower
59、-ticket mood boosters,and there will be opportunities to trade consumers up to premium ranges as they shift spending from out-of-home venues to in-home.Health concerns have also grown in the face of pressure on finances,so as pressure eases there will be opportunities for higher ticket categories to
60、 capture spending with products with proven efficacy in improving mental and physical wellbeing,such as French-founded electronics hero Withings range of smart health devices,or even the growing trend in the UK toward high-ticket but quick acting health remedies,such as Get A Drip,a company which of
61、fers vitamin injections and booster-shots to time-pressed consumers hoping for an instant health boost.More focus on wellbeing as big-ticket spending picks up13TravelThe easing of international travel restrictions in March 2022 led to a sharp spike in demand for overseas travel,as consumers were eag
62、er to head away for the first time since before the COVID-19 pandemic.However,the industry struggled to cope with this overwhelming demand,as staff shortages led to widespread cancellations and disruptions at various airports.As a result,many European consumers opted for domestic holidays in order t
63、o minimise any risk of travel disruption.Although the intensifying cost-of-living crisis forced some consumers to watch what they spent throughout 2022,the holiday market continued to benefit from consumers desire to get away post-lockdown,the savings that were built up over lockdown,and people maki
64、ng use of the huge level of refunds and credit notes that travel companies issued during the lockdown periods.Many consumers have been keen to make up for missed opportunities by staying in destinations longer than usual or by opting for more premium experiences whilst on holiday.Package holidays ha
65、ve performed resiliently as they allow consumers to manage overall holiday costs,with many operators offering low deposits and monthly payment options.Package holidays accounted for an estimated 39%of all overseas holidays taken by UK residents in 2022,the second-highest share since 2015.Some consum
66、ers have remained more receptive to the protection that package holidays offer following COVID-19-related disruption,and operators have seen a higher demand for beach holidays and luxury travelwhich are more likely to be booked as a package.Mintel estimates that the volume of overseas package holida
67、ys taken by UK residents recovered to 17.6 million in 2022(up from 3.6 million in 2021),with the value of the market reaching 17.4 billion(up from 3.6 billion in 2021).Jennie Bryans,Travel and Leisure Analyst,Mintel Reports UKPackage holidays accounted for an estimated 39%of all overseas holidays ta
68、ken by UK residents in 2022,the second-highest share since 2015.14Overseas holiday market to fully recover to pre-pandemic levels In 2023,holidaymakers desire to make up for missed opportunities is being tested heavily,not just by the rising cost-of-living but also by the significant increase in the
69、 cost of overseas holidays and airline tickets.Despite this,we expect the value of the overseas holiday market to fully recover to pre-pandemic levels in 2023.Whilst some consumers have had to cut back on the volume of trips they usually take,most people are still prioritising their main/summer holi
70、day,with many going all out to ensure they have a special experience that all the family can look forward to.Leading operators,including TUI,have announced that bookings for the upcoming summer period are running ahead of pre-pandemic levels.Mintels latest UK Household Confidence Tracker(May 2023)al
71、so shows that the number of consumers who booked a holiday in the past three months is back to its pre-pandemic level at 32%.Looking forward,short top-up breaks and city breaks are expected to take off again once consumer confidence fully recovers.These types of trips have fallen victim to COVID-19
72、restrictions and the rising cost-of-living in recent years,but demand will inevitably recover as consumers have the means to fulfil their travel ambitions once again.The high popularity of both summer beach holidays and overseas city breaks provides opportunities for brands to increase their focus o
73、n coastal cities and multi-centre holidays,where city and beach destinations are combined.Over half(56%)of holidaymakers would like to stay in multiple locations whilst on holiday and 45%of this group would be most interested in combining a city and beach break.Destination marketing organisations ca
74、n tap into the high interest in coastal city breaks by developing promotional campaigns focusing on the perfect mixture of beach/relaxation and city/cultural discovery themes.15Beauty and Personal Care While many consumers turn to beauty for an affordable mood boost,giving the market some protection
75、 from an income squeeze,overall retail sales of Beauty and Personal Care(BPC)in Europe were sluggish in 2022.The cost-of-living crisis drove cautious spending and a short-term focus on value.Today,37%of BPC buyers in France say they wait until a BPC product goes on discount before purchasing.Across
76、Europe,there is a tendency to avoid buying BPC products on impulse,instead shopping around to find the best price and switching to lower-priced brands/products.Continued supply chain disruption,higher raw material costs linked to the conflict in Ukraine and a shift away from excessive consumerism an
77、d towards streamlined routines amid climate change have also contributed to lacklustre retail sales.Rosalia Di Gesu,Associate Director,Beauty&Personal Care16Suncare sales boosted and set to remain resilient The return to international travel has boosted suncare sales.In the UK for example,suncare sa
78、w an estimated 29%increase in value sales in 2022(vs 2021).The categorys resilience is set to continue given climate change and more disruptive innovation,pointing to increased engagement beyond the summer season.The protective benefits of sunscreen now extend beyond UV protection,encompassing prote
79、ction from pollution,blue light and more.Suncare innovation has also become more inclusive with brands such as Cay Skin(by model Winnie Harlow)and Kinl(by Japanese tennis player Naomi Osaka)emphasising suitability for all skin tones.The continued blurring with skincare also bodes well for suncare wi
80、th innovation exploring skincare-first serum textures,hero skin-friendly actives(eg hyaluronic acid,niacinamide)and skin barrier protection.Looking ahead,BPC has historically proven resilient against economic headwinds as consumers have turned to beauty as an affordable means to lift their mood.In I
81、taly,for example,77%of BPC consumers say shopping for new BPC products boosts their mood.Pent-up demand for feel-good beauty is already benefiting colour cosmetics and fragrances,sectors that were especially hard-hit during COVID-19.However,recovery is very much dependent on the economic situation,a
82、s consumers are expected to continue spending cautiously.In BPC,this translates to more conscious consumerismconsumers might be buying less but will be more willing to spend on products they deem worthy.Consumers might be buying less but will be more willing to spend on products they deem worthy.17P
83、remium private-labels popularity to continue if quality and affordability maintained Private-label beauty earned new followers during the economic crisis,and many will switch over more permanently if the sector continues to deliver on quality,as well as affordability.Perceptions of the sector have s
84、hifted:62%of Germans believe that many value private-label BPC brands are produced by well-known BPC brands.Dupe(short for duplicate)culture will also have a lasting impact.Sainsburys Source of Nature Cleansing Balm,for example,was praised on TikTok as an amazing 4 dupe of Elemis cleansing balm.Priv
85、ate-label brands that hone in on quality will especially appeal,which is what makes brands like Boots No7 so popular.The retailers much-hyped ingredient-first No7 Future Renew series is marketed as containing a world-first super-peptide blend.Private-label brands are also using beauty communities.Al
86、di,for example,launched the UKs first-ever supermarket Beauty Club in May 2023.As consumers have more money to spend,it doesnt necessarily mean they will switch back to branded products.Private-label brands are innovating their products and brand strategies.Despite premium private-label brands being
87、 more expensive than some branded alternatives,consumers will seek out quality and be willing to spend on the sector.62%of Germans believe that many value private-label BPC brands are produced by well-known BPC brands 18CONTACT US USShape Your FutureWere here to take the guesswork out of your proces
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