Consumer Goods and Services

Shrinking wallets, growing consumer needs

September 5, 2022 -Minuten Zeit

rESEARCH rEPORT

In brief

The last two years have reshaped human needs and priorities, and there are trade-offs people are willing to make amid a new crisis.
Even amid increasing financial pressures, people are willing to sacrifice spending in other areas to purchase both new essentials and new luxuries.
People are discovering new digital spaces to explore, create, connect and escape from the realities of life.
CPGs need to act with empathy, understanding how existing needs and budget constraints impact human desires.

Consumer packaged goods companies (CPGs) must navigate a new challenge. The world is still rebounding from the global pandemic, the war in Ukraine rages on, energy prices continue to soar and consumer price inflation persists at the highest levels seen in decades.¹As a result, consumer confidence (measured by the OECD’s consumer confidence index) is even lower than it was during the peak of the pandemic.²

People are not only re-evaluating spend and making trade-offs, they are doing so with a set of priorities that has been redefined in the last two years. CPGs cannot rely on an existing playbook; they must design new strategies that cater to the unique circumstances of the ever-changing human being.

New consumer priorities

The last two years of health crises and lockdowns have reshaped human needs and priorities. Spend on foods with health claims grew 4.7% YoY in 2020 on average, compared to 0.9% for those without.³ Consumers now consider health and wellbeing an essential, similar to groceries and soap. Any CPG can tap into this growing opportunity—whether in a traditionally health-oriented category or not.

When times are hard, people need to indulge and to feel pampered, even temporarily. The at-home occasions we grew accustomed to over the last two years, such as eating and socializing, are now among consumers’ top treats of choice. Typically budget-strapped consumers plan to cut down on dining expenses.

Our research shows that whilst consumers will eat out less, take-away food will be more resilient – with 1 in 3 planning to cut back on eating out but maintain or increase spend on take-aways.⁴

New ways of living

During the pandemic, people turned to digital channels out of necessity. They discovered how to fulfill their needs for connection, entertainment, health and more virtually. Today, over half (55%) of consumers say that more of their lives and livelihoods are moving into digital spaces;⁵at the same time, the metaverse has arrived – presenting new opportunities to explore, create, connect and escape from the realities of life. Among the more than 11,000 consumers we surveyed, more than half had already purchased a virtual good or taken part in a virtual experience or service in the past year. That figure is expected to rise as interest in making purchases via the metaverse regardless of budget pressures grows.⁶

64%

of our surveyed participants had already purchased a virtual good or taken part in a virtual experience or service in the past year.⁶

83%

of our surveyed participants showed interest in making purchases via the metaverse regardless of budget pressures.⁶

While this may seem counterintuitive, the barriers to the metaverse are lower than one might think. Consumers are not required to invest in expensive tools and equipment to participate; many companies are developing metaverse experiences that are accessible right from a person’s phone or computer. This means an arena once dominated by luxury goods and an affluent clientele is now open to all with internet access. Any brand that wants to not only retain relevance but build deeper consumer relationships and find new sources of revenue during these challenging times must start activating this platform.

New approaches to sustainability

One might expect that in times of financial pressure, people will forego sustainability. However, our data shows that people are still taking action to live sustainably. More than half of those surveyed (55%) are trying to uphold their sustainable values.⁷

Budget pressures have no impact on sustainability values – 56% of consumers with budget pressures plan to uphold their sustainable behaviors in the next year vs 54% of those without.⁷

One of the biggest shifts we see compared to two years ago is a marked shift towards conscious consumption (shopping for only what we need and making it last), but the ways in which consumers go about it varies. People are choosing sustainable options that are budget-friendly, such as refilling, group buying and buying second-hand or recycled items. As consumers continue to tighten their belts, these habits are likely to accelerate. CPGs must innovate with offerings that deliver on values and value: Innovations that are good for the planet, good for the wallet and good for the consumer.

What to do now: Three key considerations

Consumer priorities and behaviors continue to evolve. There are three considerations CPG leaders should keep in mind as they design future strategies in a volatile environment.

Drive growth through new leadership
Human advancements and technology are making it possible to solve for the previously unsolvable. However, historical skills and competencies are not enough to navigate the challenges that humans continue to face. Leaders need to move from a reliance on industry experience to market-leading expertise in emerging technology – and, increasingly, science. Leaders will translate this expertise into opportunities that impact people and business.
Fuel growth through empathy
CPGs can only be successful if they truly understand the complexities facing the human being and translate this into meaningful action. In today’s inflationary environment, consumers are looking for both affordability and little luxuries – leading to the need for strategies such as barbell pricing. CPGs must also look to options that are both sustainable and budget friendly. This requires companies to shift the burden of sustainability into their own operations, driving affordability through changes in processes and manufacturing.
Organize around the human being
CPGs must reimagine their business through the lens of the consumer. This means radically rethinking talent, processes and technology around human needs and inviting the consumer in as a collaborator. This might mean integrating data, systems and analytics across the consumer journey to surface appropriate insights and drive next best action. It could also require a complete reorganization of the operating model.

What to do in the future

The world will continue to change. The CPGs that lead with new leadership skills, drive new solutions rooted in empathy and organize around human needs will be the ones to win the hearts and minds of consumers.

References:

¹Bureau of Labor Statistics

² OECD

³Global Data

⁴Accenture Consumer Pulse Survey – Wave 2: 7^th-25^th April 2022

⁵Accenture Technology Vision 2022; Meet Me in the Metaverse: The Continuum of Technology and Experience Reshaping Business

⁶Accenture Q2 Pulse Consumer Survey: 7^th-15^th Feb 2022

⁷Accenture Consumer Pulse Survey – Wave 2: 7^th-25^thApril 2022