Despite news of the UK slipping into a technical recession in the final quarter of 2023, Mintel reports consumer confidence is on the up.
Rising real wages is one reason behind this, but it’s also a result of consumers having honed their ‘survival skills’ following five years of relentless instability.
According to Mintel, the fall in GDP is a ‘side issue’ compared to the impact of the pandemic and inflation. And similar to the income squeeze that came after the financial crisis, most shoppers remain undeterred to spend if it’s for ‘the right product’.
The word ‘recession’ still holds symbolic power, of course, but Mintel’s experts say the change will actually have minimal impact on most consumers.
"In the real world, a 0.3% decline isn’t going to feel any different than a 0.3% increase. What really matters is how much money you’ve got left in your bank account at the end of the month,” explained Toby Clark, director of EMEA research at Mintel.
In fact, previously falling real wages meant that many have already been undergoing a ‘recession-like’ experience well before we officially encountered one. But with that trend now reversing, with real wages rising ever since mid-2023 and edging ahead of the rate of inflation, many have more slack in their budgets.
Whilst national economic activity fell in the second of 2023, Mintel reports that 28% of consumers say their finances are healthy and 44% say they’re at least doing okay.
This headline data hides significant variation across different demographic groups, of course. Mintel found that 21% of people who have a household income of less than £15,500 are either struggling or are already in financial trouble, compared to just 2% of people earning at least £50,000.
The firm’s January data did show a drop in ‘sentiment’, but a similar post-Christmas dip was also seen in 2021 and 2022. The medium-term trend, however, is broadly positive, with ‘sentiment’ overall higher at the end of last year compared to any point in 2022.
Whilst sentiment is holding up, the cost-of-living crisis is still having an impact on consumer spending. Most continue to alter their behaviours in response to higher price tags, with 34% now shopping at lower cost retailers.
There has also been a movement towards private label, with a 32% shift. Data also showed that 43% report being more careful about spending money on luxuries overall.
However, Mintel has said for food and drink specifically, people are still keen to treat themselves. As many as 49% of adults bought premium alcoholic drinks in the 12 months to October 2023, including 42% of those describing their finances as tight/struggling.
These behaviours are more pronounced among the hardest hit, with 67% of people struggling to make ends meet saying they’ve reduced their energy usage at home, for example. This will likely have an impact on what those consumers are eating, as previously reported in the media.
Overall, the changes in behaviour have been most obvious in pricier segments like meat substitutes and chilled ready meals, and discretionary items like desserts, where volume sales fell in 2023.
Commenting, Kiti Soininen, category director for food & drink at Mintel, said: “"This continues to create opportunities for premium products. Among recent examples, premium brands Charlie Bigham’s and Wasabi outperformed the chilled ready meals segment in 2022/23, while brands at the higher end of mass-market like San Miguel and Corona were among star performers in lager."
Altogether, the news of a technical recession is unlikely to bring further disruption to F&B, the firm contends. This is because as high inflation, along with with its large share in household budgets and the ability to make immediate changes to shopping habits, have already made food and drink a prime candidate for behavioural changes.
In other news, drinks giant Diageo is said to be exploring the sale of three brands, including Pimm's.