11.19.2008

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A Brand Called Hope
Reimagining Consumer Culture
By Harvey Hartman

A valuable resource for anyone in the food industry! A Brand Called Hope delivers the knowledge, cultural models and insight into consumer behavior you need to reimagine brands, categories, products and experiences.

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05.21.2008 Voting With Dollars

05.14.2008 Understanding Consumer Behavior in Tough Times

04.30.2008 A Convenience Truth

03.05.2008 Will $4 Gallon Gas Change Consumer Behavior

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Making Ends Meet?

Even though very recent gas price declines are providing some measurement of relief, many consumers are finding it difficult to make ends meet. The unemployment rate is at a 14-year high as employers shed 1.2 million jobs across America to-date in 2008. According to the U.S. Bureau of Labor Statistics, the motor fuel index is still tracking 31% higher than a year ago. The index for food at home is up 7.6% over 2007. (The CPI for food increased four percent in 2007, which was the highest annual increase since 1990. Prices for food consumed at-home rose 4.2 percent, while food eaten outside the home increased 3.6 percent in 2007.)

With a bleak outlook for the balance of 2008 and economic uncertainty certain to extend well into 2009, consumers are finding ways to economize now.

The Hartman Group, in collaboration with the shopper survey group, a National Research Network (NRN), has been keeping a close eye on how consumers are coping during these turbulent times. NRN’s report, Consumer Cutbacks in Today’s Soft Economy, finds that consumers are cutting back to stretch their dollar. Figure 1 depicts some of the tactics consumers utilize to downsize the financial squeeze they are feeling. As you can see, about two-thirds (66%) of consumers are dining out at fine dining restaurants less often and when they do dine out, half (51%) are choosing less expensive items.

While the roller coaster price of a gallon of gas has garnered much of the media attention for the better part of 2008, almost every facet of consumers’ lives has been impacted to varying degrees depending primarily on income level, presence of children in the home and region of the country.

When Hartman Group researchers, for example, talked recently with consumers in Indiana, the issue of heating one’s home was very top-of-mind in July (and cold weather was still months away). Home energy costs are just one aspect of a tanking economy. In other regions of the country, consumers may economize by driving less, carpooling or taking some form of public transportation. But in Indiana, you can only turn the thermostat down so far in the winter. Knowing that you face rising heating bills, forces one to economize in other ways — like groceries.

In other Hartman Group interviews on the economy, consumers talked about stockpiling firewood and plans to seal off rooms of their home in anticipation of managing costs this winter. Many consumers have a budget set up to pay their heating bills that are spread out over the course of the year. Consumers have seen those monthly budget amounts increase substantially ($100 - $200 monthly) this year already.

When disposable income shrinks, home values decline, and credit card debt rises, something has to give and for many of American consumers, especially lower income households, spending less on food is an immediate solution. The report, Consumer Cutbacks in Today’s Soft Economy, finds one in two families (51%) have cut back on buying and preparing some types of food or dishes to save money. A disproportionate number of these people are under 34 years of age and earn less than $30,000 a year. About four in ten consumers (43%) are buying fewer organic foods or no longer pay extra to be “environmentally responsible” in an attempt to save money (Figure 2).

Other economizing strategies include buying milk and eggs direct from local area farms or buying sale items in bulk from co-ops such as cases of juice, olive oil, or 50 pound bags of brown rice.

Not Quite Ready to Give Up on Indulgence Items

While consumers may be scaling down or cutting back on food consumption there are still some items that are necessary indulgences. In the face of economic uncertainty, consumers find some version of small and “doable” indulgence as a necessity. One woman, for example, buys Breyers Ice Cream as an economizing tactic because it is a less expensive alternative to give her family than going to the ice cream shop. Another woman told us that she buys Cappuccino Coolers from the grocery store, which keeps her from driving through Starbucks and spending more. In both instances, consumers feel they are nurturing their indulgences without feeling deprived.

Consumers may be economizing in some areas, but when it comes to cutting back on premium goods, such as the aforementioned examples or products like artisan baked breads, it is harder for them to “go backwards” once they've begun integrating high-quality products into their lives. If consumers place a premium on eating quality foods, they will continue to buy them; they might cut down, for example, on the amount of organic meat that they’re buying, but they will buy organic meat. It’s the unnecessary indulgences or the secondary priority items that consumers will live without.

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