While food price inflation has started to ease in recent months, latest research by Barclays shows more consumers (70%) looked for ways to reduce the cost of the weekly shop last month compared to August (67%).
Of this group, 49% were buying budget or own-label goods over branded lines in supermarkets. A further 52% took advantage of multibuy deals, bundle offers and/or buying items in bulk to reduce costs.
Meanwhile, 47% of those surveyed who are cutting back on grocery spending are now using vouchers or loyalty points to obtain money off at the checkout, while 41% are shopping at multiple supermarkets to source a range of deals.
However, the research suggests that many consumers are questioning whether these offers provide the best value for money. Two-thirds of shoppers (67%) believe that supermarkets inflate the regular price advertised for some products so that the promotional prices offered through their loyalty schemes look like a better deal than they really are.
Meanwhile, a higher proportion of consumers (76%) noticed examples of ‘shrinkflation’ in September than in August (71%), with chocolate (48%) remaining the most cited product impacted by this trend.
This comes after 59% said they’ve noticed that some products have changed their packaging in order to disguise a product inside is smaller or weighs less, while 68% stated that supermarkets should put labels on products informing customers when they have shrunk in size/weight without the price being changed.
The research also found that 47% of people have noticed more examples of ‘surge pricing’, where companies raise the prices of products and services during peak times, or when demand is higher. Of those who have spotted this growing trend, 32% have seen an increase in the price of food and drink in pubs and bars during peak times, such as evenings, weekends and during major sports events.
Credit and debit card data from Barclays shows that consumer spending grew 4.2% year-on-year in September – less than the latest CPIH inflation rate of 6.3% but higher than August’s growth figure of 2.8% – as the late summer sun boosted in-store spending.
The Rugby World Cup helped drive spending in pubs and bars, yet growth slowed on restaurants and takeaways as consumers began saving money for the festive period.
Spending on essential items grew 4.6%, considerably higher than last month (1.0 per cent). This was largely due to an upswing in fuel spend (-10.9% versus -20.1% in August), driven by rising petrol and diesel prices, as well as a 7.0% uplift in spending on groceries, which was higher than August’s growth (4.5%).
Esme Harwood, Director at Barclays, commented: “Grocery spending tapered off over the summer, thanks to the long-awaited drop in food price inflation. Worryingly, growth sped up again in September, which could be an early warning sign that food prices may not come down as quickly as we’d hoped.
“Eagle-eyed shoppers have spotted more examples of ‘surge pricing’ and ‘shrinkflation’, and are becoming sceptical about the value of supermarket loyalty schemes. Consumers are also starting to pull back their spending in some non-essential areas so that they can put more money aside for the festive season.”
Jack Meaning, Chief UK Economist at Barclays, added: “Over the last few months, a picture has been building of consumers beginning to pull back on discretionary spending as the cost of living, and monetary tightening from the Bank of England increasingly bite. We’ve seen the warning signs from surveys, and now we see it in the more concrete spending data.
“This suggests the outlook for consumers, and the businesses that rely on them, is weak, even as they finally see their disposable incomes rise faster than inflation. It makes it hard to see anything but a relatively stagnant economy on the horizon.”
NAM Implications:
- The key standout is the growing realisation that trust has been the main casualty of lockdown fallout (see the latest NamNews Editorial)
- Couple this with the fact that consumers who have survived are the savviest ever.
- Meaning only the good guys will succeed in converting them to repeat sales/purchases.
