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Rising food costs causing ‘consumer recession’, say analysts

By Nathan Gray , 26-Jul-2011

Rising inflation is forcing consumers to cut their shopping budget, leading to early indications of a ‘consumer recession’ hitting Europe, according to analyst group SymphonyIRI.

The research and analysis of the latest figures on fast moving consumer goods from SymphonyIRI Group show that despite an increase in GDP and falling unemployment in many European countries, food prices are on the rise and shoppers are buying less in their weekly shop.

 

Tim Eales, director of Strategic Insight at SymphonyIRI Group, said: “Consumer confidence is at an all time low across Europe. With food prices rising faster than earnings, nervous consumers are now starting to reduce their weekly grocery shop.

 

“This is the first time we have seen a reduction in grocery sales volume and is in contrast to shopper behaviour during the recession where many countries increased their weekly grocery shop as they traded down their treats to cook at home instead of eat out for example,” he added.

 

Sales slump?

 

The SymphonyIRI study of sales data by volume and value, as well as promotional activity, in seven European countries for the first quarter of 2011 showed consumers were buying less.

 

The publication of the SymphonyIRI study followed news in the UK that in June the country's food retailers had seen the sharpest fall in sales volumes since records began in 1988.

 

The analysis also showed that fast moving consumer goods volumes in the UK fell by 1.8 per cent during the first quarter of the year. Volumes in Italy also fell by 1.8 per cent while, in Germany, they were dropped by 1.6 per cent. However, in the Netherlands, France, and Spain, volumes rose.

 

The report also suggested that many European brands are adjusting to changes in the marketplace by increasing their use of price promotions. SymphonyIRI said manufacturers may be using such price promotions more to protect sales and profits. In the UK, for example, they said that 50 per cent of fast moving consumer goods are being sold on promotion.

 

“There is no doubt that brands are attempting to counter the triple challenge of rising raw material costs, the increasing dominance of supermarket own-label brands and a more discerning shopper who is increasingly ready to vary their shop to get a better deal,” said Rod Street, executive vice president of consulting, international at SymphonyIRI.

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