Ongoing consumer good price hikes and how consumers are guarding their household purse strings 2022

1.Prices are creeping up across an increasing number of items

Prices are continuing to climb across a wide range of areas including food products and services, driven by soaring base ingredient/material and logistics costs. From October, the price of alcohol also began to climb, with increases in prices now accelerating across a growing range of genres. Several news stories have even covered the way consumers are rushing to purchase alcohol in anticipation of these price increases.
Let’s start by taking a look at how actual selling prices are changing in store using INTAGE’s data.

On observation of the average selling price in store by product genre, it is apparent price increases have been affecting a growing range of items since July. Upon checking the selling prices on site of products consumers actually pick up, in addition to oil, which was one of the first products to increase in price from last year, wheat-related products also showed a marked trend to increase in price.

Compared to the 2020 averages before the current full-fledged price increases, wheat has increased to 113%, bread to 110%, and spaghetti to 110% – all double digit. In addition, despite being relatively stable price-wise until May, it is apparent the increase in the price of imported wheat is beginning to strongly impact household dining tables, including sizable increases to packet noodles (112%) and cup noodles (110%). In addition to canola oil (161%) and salad oil (128%) which have seen significant price increases in the past, mayonnaise, which is made from oil, also increased to 121% in the condiments category. Sugar and soy sauce have also gone through double digit increases, reflecting the broadening impact of price increases on the condiments category. (Fig.1)

Fig.1

2. Awareness of price increases and how consumers are adapting in life – holding off purchasing/economizing

Let’s next take a look at the results of a recent INTAGE survey on consumer awareness of price increases and how they are adapting in life.
When asked where they feel prices are increasing, “groceries” was most common, with around 80% noticing price increases here. This was followed by “utilities such as electricity, gas, and water (59%)”, “daily necessities and consumables (57%)”, and “fuels including gasoline (56%)”. Next, on comparison with the June survey, price increases have become more palpable in virtually all genres, with particularly conspicuous increases in “alcoholic beverages (35%, up 15pt from June)” and “beverages (51%, up 12pt from June). Price increases when eating out are also becoming increasingly palpable. (Fig.2)

Fig.2

We also asked consumers how they were adapting to the price increases with various items, such as by economizing.
Here again, awareness of economizing was most common at 1^st place with “groceries (39%)”, followed by “utilities such as electricity, gas, and water (33%)”, “daily necessities and consumables (24%)”, “beverages (23%)”, and “eating out (22%)”. Compared with June, intent to economize has increased in virtually all genres. Notable changes are observed in awareness of economizing with “groceries (up 7pt)”, “alcoholic beverages (up 6pt)”, “beverages (up 6pt)”, and “eating out (up 6pt)”. This highlights the fact that in response to ongoing price increases, consumers are trying to adapt by obtaining products at lower prices or refraining from purchasing them across various products/services. As we move toward year’s end and a season where events involving eating out are on the increase, it’s likely this will affect us in choosing more reasonable restaurants, and cutting back with alcohol and the size of our meals. With restrictions on behavior to curb increased infections lifted, this is likely to be a sizable concern for restaurants who have been eagerly awaiting this time to kick start their business. (Fig.3)

Fig.3

On examining the same data by gender, women’s economization in virtually all categories including “groceries (47%)”, “utilities such as electricity, gas, and water (38%)”, and “daily necessities and consumables (29%)” is strongly apparent. Women are deemed more conscious of economizing because of their awareness of price increases in various product categories through daily shopping, which they are likely to engage in more than men. Conversely, men only rated higher than women on “fuels including gasoline (23%)”. This may be due to them feeling price increases through opportunities to refuel at gas stations. (Fig.4)

Fig.4

3.How consumers are guarding their purse strings with bread – private brand and drugstores as allies

Next, let’s take a look at INTAGE’s consumer panel data* on bread, staple food in our daily meals that is also creeping up price-wise. On tabulating the proportion who had purchased private brand bread in supermarkets, the proportion of consumers who have purchased private brand has been slowly increasing since October 2021 when the prices of various groceries started to rise noticeably, with around 20% purchasing private brand in August. (Fig.5, left)
In addition, an outflow from supermarkets to drugstores as purchase channel has also been observed. Our data suggests a shift towards private brands and drugstores is occurring with bread. (Fig.5, right)

Fig.5

Drugstores currently offer not only medicine, but daily necessities, groceries etc. too, making them convenient stores consumers can complete their shopping at in the one stop. The fact they also actively encourage point and coupon usage paints them in an attractive light to consumers striving to guard their purse strings. Let’s examine how the share of grocery spending has shifted in supermarkets and drugstores. Using pre-covid December 2019 as our baseline (100%), drugstores are on an uptrend, while supermarkets are on a downtrend. (Fig.6)
Since the advent of covid, consumers have shifted to bulk buying, since it enables them to avoid exposure to the masses, reduces the need to visit a range of stores, and the number of times they need to go out shopping. Driven in part by this trend, spending at drugstores have increased due to being able to buy a variety of products in the one stop, and with price increases continuing, this side of them appears to have been accepted by consumers striving to guard their purse strings, ensuring they are seen as powerful allies to consumers struggling with these price hikes.

Fig.6

4. Wrap up: Going beyond mere cheapness as an edge

Consumers’ outlooks and behavior regarding shopping are changing in response to price hikes across various genres. However, from a broader perspective, the fact there is a trend toward greater health consciousness and improved quality of life through increased time spent at home should not be overlooked. While guarding one’s purse strings against price hikes is certainly a key issue for consumers, they also display increased health consciousness apparent in some of the top recent hit products being health-conscious offers including oatmeal, malt beverages, and protein. People’s purse strings thus appear to loosen when they have their or their family’s health in mind. When you focus solely on cheapness, you tend to lose sight of health of mind and body. Adding accent and richness to life is also important. I thus think creating products/services and stores with a strong grasp on the consumer mindset of paying for what they value, instead of blindly plunging into a price war, may be a way forward.
So how do we deliver unique value/experiences with these changing consumers in mind?
Asking questions like this is likely to uncover latent opportunities.

Data used and related platforms
[SRI+^® (nationwide retail store panel survey)]
Retail store sales data based on daily sales information continuously collected from approximately 6,000 stores nationwide including supermarkets, convenience stores, home centers/discount stores, drugstores, and specialty stores, boasting the No. 1^*1  sample number and chain coverage among retail store panels in Japan.
*SRI+ statistically processes data, and does not disclose any information that could identify the stores monitored in the survey.
^*1As at April 2022

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