At an investor conference Wednesday (3/9), Tracey Joubert, CFO, Molson Coors Beverage Co., was asked whether there’s a risk of trading down as consumers feel inflation pressure. She basically pooh-poohed the idea, noting that “during the pandemic we saw a lot of people trading up. We kept the big, healthier brands and got rid of the not-so-healthy brands.”
We don’t know whether consumers are going to cut back on bev/al as a result of inflation — our grocery bill, which has been around $220 topped $305 yesterday — but a new study ICSC, which represents shopping centers and similar marketplaces, found inflation is the predominant economic concern among adults at present, with 50% saying it has impacted their financial situation over the past 24 months.
The survey also found that a plurality of Gen Z (49%) and Millennials (47%) indicated their financial situation had improved in the past year, suggesting these groups will be critical in continuing the economic recovery of the pandemic.
Two years since the start of the pandemic, the survey found that 39% of consumers overall report that their financial situation has worsened; these consumers are now experiencing additional worries around higher prices on essential items. Concern isn’t limited to just those in a worse financial position, as 82% of adults report being impacted by price changes for groceries, 76% on utilities and 75% on gasoline, all of which have seen significant hikes in recent months.
While the majority of consumers (77%) let their personal circumstances rather than the overall economy dictate their spending, those who might face economic hardship are ready to cut costs starting with dining out (64%) and entertainment (54%). Should their personal financial situation or perception of the economy improve, consumers indicated they are likely to spend more on higher quality groceries (52%), dining out (41%), and saving (40%).
“While recent retail sales figures demonstrate consumer optimism, consumers are also acutely aware of the need to shift their spending with shifts in the economy,” stated Tom McGee, President/CEO of ICSC. “Consumer sensitivity to food, energy and other price increases could result in many dialing back their spending in other categories. Retailers will need to find ways to continue serving price-conscious consumers while expanding their offerings as pandemic-related restrictions and fears decrease.”
Consumers identified retail prices (77%), energy and gasoline prices (69%), employment status or wages (59%), and personal debt (59%) as the factors that have the greatest impact on their expenditures or spending habits. Interestingly, only 35% of consumers cited the stock market and their personal 401k plans as drivers of their spending habits. While only 37% of consumers cited geopolitical issues around the world as a factor that impacts their spending, the current conflict in Ukraine is likely to add to inflation and impact consumer perception.
At their peak, personal rates of savings topped 27%, and ICSC’s survey found that 80% of adults saved money during the pandemic, including 92% of Gen Z and 84% of Millennial respondents. Those who saved noted they intend to continue saving that money (49%), use it to pay down debt (34%) or use it for retirement (26%). Perhaps as a result of increased saving rates, a majority of consumers (63%) feel prepared to manage their household’s finances in the event of an economic downturn.