It’s value over values as consumers feel pinch

Food and drink manufacturers report that “value” products are gaining popularity as a result of decreasing consumer spend.

Data from the Office of National Statistics found consumer spending in the third quarter of this year saw its biggest drop since late 1995 and fell 0.2% between July and September.

Paul Moody, chief executive of Britvic, said the drinks market was not immune to the “consumer slowdown”. It had fallen overall by 0.8% in volume over the period, according to the company’s preliminary results for the year to September.

The more expensive categories such as smoothies and pure juice particularly took a hit, Moody added. TNS data showed that cash sales of Innocent smoothies had fallen by one-fifth - about £27M - in the six months to September.

The cola market had risen 3.7% in volume and carbonates increased 1.4% in volume, which was accentuated by consumers looking for “value propositions, particularly in large-pack carbonates”, said Moody. Pepsi had outperformed the market with an 8.1% market volume increase.

In a trading update, Finsbury Foods also found that consumers were turning to value products. Analyst Andrew Saunders at Panmure Gordon said: “We have already seen retailers increasing levels of promotional activity and price discounting in many food categories. To this end, it is not surprising that Finsbury has also been supporting the sales growth in cakes with its largest customers through an increased level of deeper-discount promotions.”

He said that, typically, cakes normally retailing at £1.59 were being sold for £1.00 on promotion. “With such challenging economic conditions expected to prevail in 2009, we believe this retail strategy is likely to remain in place for some time to help maximise consumer value,” Saunders added.

However, speaking at a breakfast meeting hosted by the Regional Food Group for Yorkshire and Humber last week, Peter Whitehead, senior business analyst at grocery think tank IGD, questioned consumers’ preoccupation with value.

Based on IGD research into consumer behaviour and the credit crunch, Whitehead told Food Manufacture​: “Shoppers are not compromising. There is not a headlong rush into value. Consumers are also buying more local and regional products - it’s about values as well as value."