Feeling the Pinch: The Consumer Outlook – January 2012 A strategic report on the challenges for the Irish Food and Drinks industry Contents Introduction Page 4 Executive summary Page 5 The market outlook Page 8 The consumer perspective Page 14 Three key consumer groups Page 19 Key challenges and opportunities Page 24 Technical appendix Page 36 © 2012 Bord Bia, The Futures Company © 2010 The Futures Company 2 Introduction Introduction Introduction Volatility and uncertainty made an unwelcome comeback in 2011 just as the prospects for the economy started to look like they might return to an even keel. Both the Irish (ROI) and British (GB) economies showed glimpses of growth before again tipping into decline. A pattern that we all hoped would be avoided, but one even the most ardent optimist could not have expected. The recovery in economies such as the US and Europe slowed as the effects of earlier significant monetary and fiscal stimulus began to fade away. Government spending came under tighter control, taxes rose and with the fallout of further austerity measures, a downward pattern on spending and output seemed inevitable. People were squeezed in 2011: whilst price inflation eased, any increase was hard to take in light of stagnating wages. Rising and even new taxes have only added to the challenges faced by people by further dwindling the disposable income in their pockets. Patterns which are likely to be repeated in 2012. © 2012 Bord Bia, The Futures Company 4 With rising unemployment and a major debt crisis unfolding on our door step, it is unsurprising that the consumer outlook for the year ahead is one of rising pessimism. People are anticipating a tough financial year; many expect to make hard choices in 2012 around what they will have to do without. For some the smart management of money and shopping around seen in previous years may no longer be enough to sustain their lifestyles. However, it is not just the economic challenges that are weighing heavily on peoples‟ minds; 2011 was a year in which many trusted institutions and pillars of society were found wanting. As people became less trusting of the wider world around them, they retrenched into a smaller group of family and friends for comfort and support. Although, we should note that the levels to which people have pulled back have had a stark impact on their happiness and emotional wellbeing. In this report, we build on learning from the previous five waves of research. For this 2012 wave we have carried out a qualitative online forum with both Irish and British consumers spanning different economic situations. This insight has enriched the findings from an online quantitative survey. Both parts of the research were conducted in the first and second week of January 2012. This report provides an insight into the challenging consumer context that is emerging for 2012 and the opportunities for brands. It is very clear that as people have retrenched into their own personal realities, life has lost much of its meaning. Whilst the pursuit of good value in the marketplace will remain, room now exists for brands to fill some of the void in people‟s lives. Something that if brands can do is likely to be rewarded with loyalty and advocacy. For more information on this report or help in applying the findings to your business please contact: Information Services Tel: +353 1 6685155 Email: info@bordbia.ie Executive Summary Executive Summary Executive Summary Large scale financial challenges give little hope for growth prospects in ROI and GB in 2012: The pace of economic recovery has slowed around the world, with Europe and the US hit hardest in third quarter of 2011. The European sovereign debt crisis and weak growth are fuelling a crisis of confidence, holding back consumption and investment in the major advanced economies of the world. In ROI, a twin economy was evident with domestic demand suppressed and growth coming from exports: With initial estimates for the third quarter of 2011 showing seasonally adjusted decreases to -1.9 % in GDP and sluggish growth predicted in 2012 for the main export markets for ROI, slower growth for 2012 appears inevitable. Britain has moved closer to its second recession in three years: A severe drop in manufacturing output in the last quarter of 2012 dented hopes that GB could avoid joining much of Europe in a slump. With many of the Government's austerity measures yet to come into full force and a weak housing © 2012 Bord Bia, The Futures Company 6 market, the GB economy faces considerable headwinds in the year ahead. A highly pessimistic view is returning: Generally consumers have remained pessimistic about the performance of their domestic economies: 89% of consumers in ROI think that the economy is going very badly or badly in Jan-12, with comparative levels of 86% in GB for the same period. Price inflation is placing greater pressure on household budgets and real wages are contracting: Pressures are clearly building on household budgets, and the smart management of money and shopping around seen in previous years may no longer be enough to sustain spending. Many more people will need to make harder choices in 2012 around what they will have to do without. The events of the past 12 months have shaken people’s trust in institutions in all aspects of their lives: Uncertainty and volatility have been the context for consumers‟ lives more broadly. Trust in institutions that have historically been seen as key pillars of society has waned: the cover up of abuse within the Catholic Church, riots in England, and News International phone hacking scandal have been some of the many events that have eroded people‟s trust. Further afield, the Arab Spring and the aftermath of natural disasters such as the tsunami in Japan further exacerbated a sense that we currently live in volatile and unsettled times. Consumers increasingly feel that they have no one else to trust but themselves. Consumers are pulling back from the connections that often provided richness and meaning in their lives. As people have become less trusting of the wider world around them, they retrench into a smaller group of family and friends for comfort and support. But the levels to which people have pulled back appears stark – losing connection with once close friends and relatives as their situations change and the patterns of their lives adjust to different economic realities Executive Summary Executive Summary Happiness is in short supply and Emotional wellbeing is in decline: We should note that humans are inherently social beings: we define ourselves and relate to the world around us through our relationships and connections. Loosing these connections can lead to loss of purpose and a sense of meaning in life. Emotional wellbeing appears to be universally in decline across recession struck Europe. Information from The Futures Company‟s Global MONITOR show declines in satisfaction with emotional wellbeing from 2009 to 2011: in ROI it has fallen from 57% of consumers rating their wellbeing in the top 3 boxes on a 10 point scale in 2009 to 46% in 2011. The shape of the consumer landscape is changing as more consumers are struggling to get by: In the ROI the „All hands on deck‟ group have become more prominent and now make up the largest segment in the country. The notable shift in size from 2011 highlights the growing pressure that is building on many households in ROI. Notably, the „Plain sailing‟ group remains largely unchanged over the same time period, highlighting that a © 2012 Bord Bia, The Futures Company 7 stable and relatively wealthy group still remain in ROI. In GB the „All hands on deck‟ group continues to grow but remains at almost half the size of the group in the ROI. Whilst, the „Choppy waters‟ group is larger in GB than ROI, the most notable difference between the countries remains the size of the „Plain sailing‟ segment. The pursuit of value is now an established consumer behaviour: What is notable is the extent which behaviours span across the segments. The pursuit of the best deal is evident in everyone‟s lives whether or not it is driven by necessity, or out of the need to feel you are being a savvy consumer. A larger, less affected and affluent pool of consumers exists in GB than in ROI: Britain remains an attractive export market due to the size and relative stability of the „Plain sailing‟ segment. With a devaluing Euro against the Pound the attractiveness of Irish imports is likely to grow Implications P Protection: Protecting consumers from uncertainty and risk P Practical: Helping consumers to plan and be more self-reliant P Permission: Encouraging consumers to make connections and see the positives of a life with less P Purpose: Giving consumers new meaning and purpose to their lives P Pride: Re-building a sense of pride and achievement The market outlook The market outlook A challenging global outlook for 2012 is dampening the effects of improvements seen in 2011 in ROI and GB Large scale financial challenges give little hope for growth prospects in ROI and GB in 2012 The pace of economic recovery has slowed around the world, with Europe and the US hit hardest in third quarter of 2011. The European sovereign debt crisis and weak growth are fuelling a crisis of confidence, holding back consumption and investment in the major advanced economies of the world. The recovery in economies such as the US and Europe is now progressing much more slowly as the effects of earlier significant monetary and fiscal stimulus have begun to fade away. The financial crisis has left large structural budget deficits in many countries, which are likely to require a lengthy period of fiscal consolidation through tax rises and / or public spending cuts in the medium term. In ROI, GDP growth in the first half of 2011 was encouraging with growth in Q1 and Q2 of 1.9% and 1.6% respectively, the first consecutive quarters of positive GDP growth since 2006 according to the Central Statistics Office (CSO). But a twin economy was evident with domestic demand © 2012 Bord Bia, The Futures Company 9 suppressed and growth coming from exports. With initial estimates for the third quarter of 2011 showing seasonally adjusted decreases to -1.9 % in GDP and sluggish growth predicted in 2012 for the main export markets for ROI, slower growth for 2012 appears inevitable. Britain has moved closer to its second recession in three years after official figures from the Office for National Statistics (ONS) showed the UK economy contracted by 0.2% in the last three months of 2011. This reversed the previous quarters‟ figures that showed growth of 0.6%, revised up from a previous estimate of 0.5%. A severe drop in manufacturing output in the last quarter dented hopes that GB could avoid joining much of Europe in a slump. With many of the Government's austerity measures yet to come into full force and a weak housing market, the GB economy faces considerable headwinds in the year ahead. A slow recovery is likely and is reflected in many independent forecasts: the latest forecasts by Ernst & Young‟s ITEM club in January 2012 have down graded GDP growth for the GB to just 0.25% for 2012 followed by 1.75% in 2013. A major contributing factor to the low expectations around growth are the continuing fears about the sustainability of sovereign debt with the Eurozone region. The cost of borrowing for many European countries is rising, undermining consumer and business confidence. Unprecedented levels of uncertainty have now emerged in the Eurozone. As market pressures grow and significant tranches of sovereign debt require refinancing in the first half of 2012, managing the crisis in a similar way to the past year may no longer be a policy option. Leaders are likely to be forced to act in the face of escalating events and to address the underlying causes of the crisis not just the symptoms. Many options exist, some more palatable than others when considering the growth prospects of the Eurozone as a whole and ROI and GB individually. Whatever the outcome, the trend of a declining pace of recovery witnessed in 2011 is likely to continue to into 2012. The real questions are will ROI and GB plunge back into recession or not? And, how much will consumer spending be impacted? The market outlook A negative perception of the economy is dampening consumer expectations for the year ahead A highly pessimistic view is returning Generally consumers have remained pessimistic about the performance of their domestic economies: 89% of consumers in ROI think that the economy is going very badly or badly in Jan-12, with comparative levels of 86% in GB for the same period. Where the countries differ is the levels feeling the Irish economy is going very badly at 39% in Jan-12 versus GB at 26% (See chart 1). It is not too surprising given this view of the economy that consumers feel their own financial situation may be challenging in 2012: 45% of ROI consumers and 49% of GB consumers feel they will have just enough money to make ends meet in year ahead and 21% and 19% of consumers in the respective countries feel they will have financial difficulties. With around three in every five consumers in the respective countries expecting some level of financial pressure; lower levels of consumer spending appear inevitable. CHART 1 How well do you think things are going for the Irish/British economy these days? Don„t Know Very Well Republic of Ireland 100% Fairly Well Badly Very Badly Great Britain 100% 18 21 38 80% 52 43 39 80% 10 25 55 65 60% 60% 59 54 61 40% 40% 49 50 50 29 25 0% 4 4 6 7 9 Jul-08 Jan-09 Nov-09 Sep-10 Mar-11 Jan-12 0% 60 40 20% 10 57 54 44 20% 26 36 15 24 14 11 3 Jul-08 Jan-09 Nov-09 Sep-10 Mar-11 Jan-12 Source: The Futures Company, Feeling The Pinch 2012 (see appendix for base sample sizes) © 2012 Bord Bia, The Futures Company 15 The market outlook Disposable incomes are being squeezed by rising taxes and low wage inflation Price inflation is placing greater pressure on household budgets In the ROI, consumer prices in November (as measured by the Consumer Price Index (CPI) remained unchanged in the month. As a result, the annual rate of inflation reported by the CSO increased to 2.9%, up from 2.8% in October 2011. The most notable changes in the year were increases in Housing, Water, Electricity, Gas & Other Fuels rising +10.6% highlighting the growing pressure of costs on items which are largely essentials. With a higher rate of VAT (rising to 23%) on some goods and services in 2012, inflationary pressures are likely to continue. In GB the latest statistics from the ONS show that inflation rose sharply to 5.2% on the CPI in September last year. CPI inflation has been driven by upward pressure from energy, petrol and food bills as well as the earlier VAT rise to 20% in January. Inflation rates remain well above the Bank of England‟s target rate of 2%. Underpinning these rises is producer input price inflation in GB which reached its highest rate since September 2008 in July last year at 18.2%. These underlying patterns highlight the cost pressure that many producers are under and the ability to absorb these rises are likely to wane in the coming years. Equally, whilst some inflationary pressure is easing in the short-term and consumers are adjusting to higher prices, low levels of inflation are still presenting a challenge for consumers as wage inflation continues to remain low at a time of rising taxes. Real wages are contracting In ROI, three years of tax hikes and spending cuts imposed since the economic crisis in 2008 have cost hardpressed families up to €613 each. Household incomes are set to be hit even further following Budget 2012 as the Government grapples to make savings of €3.8billion - to hit targets set under the conditions of the EU/IMF bailout. The new Universal Social Charge (USC) was introduced in January 2011. Many lower paid workers would have previously been exempt from the Income Levy and the Health Levy – but they now have USC deductions from payslips. Also, some workers who don‟t pay Income Tax will be liable for USC as soon as they earn €77 a week. In GB, average earnings growth was 1.9% including bonuses in the year to November 2011 – well below inflation. A survey conducted by the Bank of England, via NMG Consulting in September 2011, highlights that the average household reports that their income had fallen over the past year by around £46 per month; continuing a trend seen in the last four annual surveys. Pressures are clearly building on household budgets, and the smart management of money and shopping around seen in previous years may no longer be enough to sustain spending. Many more people will need to make harder choices in 2012 around what they will have to do without. “My biggest financial concern is the fact that for the last few years our income and savings are going the wrong direction, and then there are taxes, taxes, taxes...” Male, 18-40 years old, ROI © 2012 Bord Bia, The Futures Company 11 The market outlook Unemployment continues to dampen confidence Unemployment remains a strong negative influence on the consumer outlook In ROI, the latest statistics from the CSO show unemployment rate increased from 14.2% to 14.4% in Q3, with longterm unemployment accounting or 56.3% of total unemployment in Q3 2011 up from 47% a year ago. According to Ernst & Young‟s Winter 2011 Economic Eye, the ROI economy is only predicted to get back to prerecession peak employment levels by 2030. CHART 2 Do you know anyone else who has been made redundant from their job in the last 12 months Yes Don't Know Republic of100% Ireland Great Britain 100% 100% 80% 46 80% 52 60% Latest figure from the ONS show that the unemployment rate rose to 8.4% from 8.3% in November 2011 in GB, the highest since January 1996. The number of young people looking for work hit a new record of 1.043m, taking the rate of16-24 year-old job-seekers to 22.3%. No 75 60% 86 82 40 80% 27 50 52 72 81 49 75 57 © 2012 Bord Bia, The Futures Company 12 50 47 50 49 51 60% 40% 40% 52 40% 57 72 48 50 20% In both countries the effects of unemployment remain widespread, touching the lives of many consumers. Whilst dropping slightly from previous waves, the proportion of people in ROI who know someone who has been made redundant from their job in the last 12 months stands at 75%, the comparative figure in GB is 47% (see Chart 2). 48 47 46 27 20% 24 13 0% 17 17 20% 40 23 Aug 08 Jan 09 Nov 09 Sep 10 Jan 09 0% Jul-08 Jan-09 Nov-09Sep-10 Mar-11 Jan-12 0% Jul-08 Jan-09 Nov-09Sep-10 Mar-11 Jan-12 Source: The Futures Company, Feeling The Pinch 2012 (see appendix for base sample sizes) The market outlook Summary and implications Consumer expect a tough year ahead The consumers outlook is not positive and we are starting to see signs of rising concern and a pessimistic outlook for the year ahead in both ROI and GB. With high levels of uncertainty over the Eurozone and prospects for their own domestic economies looking depressed, consumers are likely to be approaching the year with caution and trepidation. “Realistically, [I hope to] make the best of the situation. This is our lot and we have to work with it...” Male, 18-40 year old, ROI Disposable income will continue to be squeezed Whilst inflationary pressures are showing signs of easing in the short-term, disposable incomes remain under pressure and are likely to continue to decline in the short to medium term. In ROI, rising taxes and low wage inflation mean any improvement in the prices of goods and services is not being felt in the pockets of the consumers. In GB, inflation remains far higher than the Bank or England‟s target rate of 2% and is outstripping wage inflation. With the spectre of unemployment hanging over many workers‟ heads, pressure on wages are likely to remain for many years. The notion of managing until times improve is beginning to pass, consumers are beginning to accept that today‟s reality is likely to be the reality they will face in the coming years. Readjustment and compromise are likely to be features of purchasing behaviour in the year ahead; a large proportion of consumers will need to make some tough choices about what they will need to do without. © 2012 Bord Bia, The Futures Company 13 “I think it will be more hard work with some difficult decisions ahead financially and work wise an upward struggle.” Female, 40+ year old, GB South West The consumer perspective The consumer perspective Consumers are living through a crisis of trust, not just a financial crisis Trust in the banks and the government remains low Financial concerns remain top of mind for consumers in ROI and GB and trust in the institutions that have lead to the financial crisis remain at low levels. 87% of consumers in ROI agree that they have less trust in banks and feel they serve their own interests, not the interests of their customers. The comparative figure for GB is also high with 75% of British consumers also agreeing. Faith in the government to be able to bring about an improvement in the economy is also low in both countries. Whilst debates rage in both parliaments around the best policies and approach, consumers are increasingly recognising that much of the current situation is dependent on the fortune of the external world and, in particular the current debt crisis in Europe. The events of the past 12 months have shaken people’s trust in institutions in all aspects of their lives However, it is important to recognise that uncertainty and volatility have been the context for consumers‟ lives more broadly. Trust in institutions that have historically been seen as key pillars of society has waned: the cover up of abuse within the Catholic Church, riots in England, and News International phone hacking scandal have been some of the many events that have eroded people‟s trust. Further afield, the Arab Spring and the aftermath of natural disasters such as the tsunami in Japan further exacerbated a sense that we currently live in volatile and unsettled times. Consumers increasingly feel that they have no one else to trust but themselves. “How confident are you that the current government can bring about an improvement in the economy?” “I rely on nobody as I can only trust myself.” Female, 18-40 year old, GB South West “At the moment it’s difficult to trust anyone...Governments are screwing us on Taxes...Bankers are screwing us on interest rates...Church is screwing us and covering it up and still thinking it’s acceptable... So I’m afraid and shocked at myself for saying it but at the moment... I TRUST NOBODY.” 71% of Irish consumers not confident Source: The Futures Company, Feeling The Pinch 2012 (see appendix for base sample sizes) © 2012 Bord Bia, The Futures Company 15 Male, 18-40 year old, ROI 68% of British consumers not confident The consumer perspective Consumers are retrenching, often losing connection with friends and the community in which they live Consumers are pulling back from the connections that often provided richness and meaning in their lives It is no surprise that as people have become less trusting of the wider world around them, they retrench into a smaller group of family and friends for comfort and support. But the levels to which people have pulled back appears stark – losing connection with once close friends and relatives as their situations change and the patterns of their lives adjust to different economic realities. More people in both ROI and GB disagree with the statement „I am more involved in my local community than I was before the recession‟ than agree. In ROI 35% disagree with the statement versus 20% agree, in GB the differences are more marked with 48% disagree and 12% agree. statement „I talk to my neighbours more now than I did before the recession‟, with more consumers now disagreeing with the statement than agreeing in both ROI and GB. The consequences of this rising disconnection may have repercussions on multiple levels. Notably, in GB a recent study by the University of Essex has highlighted that Britain has become more tolerant of dishonesty. According to researchers, Britain is experiencing a major increase in dishonesty with many of us willing to lie and cheat. Having an affair, lying to further one‟s interests, buying stolen goods and having underage sex are all seen as more acceptable than they were a decade ago. “You get let down by some people...the real people in your life and if it happens often enough...my natural reaction is to pull back or totally pull out...” Male, 18-40 year old, ROI “I rely mainly on my husband, my parents, sister and my inlaws for everything from advice, babysitting, socialising and support.” Female, 18-40 years old, GB North East Similar patterns are evident for the GB ROI “I talk to my neighbours more now than I did before the recession” 21% agree 34% disagree Source: The Futures Company, Feeling The Pinch 2012 (see appendix for base sample sizes) © 2012 Bord Bia, The Futures Company 16 11% agree 46% disagree The consumer perspective Whilst consumers feel a little more secure and less exposed as a result, it certainly has not made them happier It is not too surprising to see happiness in short supply with all that is happening in the world today and the major issues affecting both economies. In both ROI and GB more people agree, than disagree, that they were happier before the recession : 53% agree and 20% disagree in ROI and 39% agree and 23% disagree in GB respectively. But we should note that humans are inherently social beings: we define ourselves and relate to the world around us through our relationships and connections. Loosing these connections can lead to loss of purpose and a sense of meaning in life. often find themselves in financially desperate situations, and lack any meaningful support network, the situation is feeling desperate. Longerterm issues of mental health may emerge as broader social issues. For the majority of consumers it is more a case of finding new connections and meaning in life to lift the sense of gloom. Consumers clearly want more from their lives and to find new meaning and purpose; a territory that offers rich opportunities for brand owners seeking to establish brands on deeper platforms than just a good price. Emotional wellbeing is in decline Emotional wellbeing appears to be universally in decline across recession struck Europe. Information from The Futures Company‟s Global MONITOR show declines in satisfaction with emotional wellbeing from 2009 to 2011: in ROI it has fallen from 57% of consumers rating their wellbeing in the top 3 boxes on a 10 point scale in 2009 to 46% in 2011. For the worst affected consumers who have been hit hard by the recession and © 2012 Bord Bia, The Futures Company 17 “I live on my own and have to say that sometimes I get a bit lonely and depressed these days, I suppose mainly because I am so short of money all the time and can't see an end to the situation... I don't have anyone to rely on.” TABLE 1 Satisfaction with emotional wellbeing: summary of top 3 boxes on a 10 point scale Country 2009 2011 ROI 57% 46% GB 52% 43% France 48% 39% Spain 53% 45% Germany 51% 44% Italy 48% 35% Female, 18-40 year old, GB Midlands Source: The Futures Company, Global MONITOR \ Happiness is in short supply The consumer perspective Summary and implications Consumers are struggling with the wider pressure in their lives 2011 provided a year of volatility and with many institutions being found wanting in addition to the banks and governments. With few people to trust, consumers have retrenched into a few close knit relationships for comfort and support. Like-for-like sales at Tesco were down by 2.3% over Christmas. Britain's largest retailer said the results, for the six weeks to January 7, were "below expectations and disappointing.” These patterns have lead to greater disconnection with the communities in which consumers live and the loss of friendships valued before the recession. Consumers are now weighed down by life more, and generally less happy and less optimistic than they were two years ago. Life, for many, is lacking meaning and purpose. The opportunity for brands is clearly to help consumers reach out; go beyond their close connections and reach back out into their communities Whilst an emphasis of cutting back on spending, staying in control and getting a deal will remain mantra for the year ahead, consumers will be looking for more from the marketplace than just a good deal. Tesco‟s performance in the market over the Christmas period in GB highlighted that good prices alone was not the most effective strategy; retailers like Morrison‟s and Waitrose out performed the no.1 retailer with better value propositions and marketing aimed at building their brands. Brands can be great facilitators of connection, inspire some purpose back into consumers‟ lives and lift a little of the gloom. Brands have a great opportunity to make stronger and more meaningful connections in the marketplace in the year ahead. © 2011 Bord Bia, The Futures Company 18 “Our price inflation was half that of the market over Christmas.” Philip Clark, Tesco CEO, 12th January 2012 talking about the lack of success of Tesco’s low price strategy Three key consumer groups Three key consumer groups Consumers’ experience of the current situation varies We first introduced the three consumer groups in the 2010 Feeling the Pinch Report. In 2012, these consumer groups continue to illustrate the different degrees to which consumers have been affected by the financial crisis. Chart 3 illustrates two factors which pull these groups apart namely, financial vulnerability and exposure to debt. All Hands on Deck: This group is least equipped to withstand financial shocks. The vast majority of people are in debt and struggling to make repayments. As a result many have had to significantly adjust their lifestyles and spending behaviours. Choppy Waters: These consumers have had to become more careful with their money and manage it on a weekly and even daily basis. The majority of this group say they will never spend money as freely as they did before the recession, with 65% agreeing in ROI and 53% in GB. Plain Sailing: This group is less directly affected by the financial crisis, being less financially exposed by having lower levels of debt and with good financial planning in place. These consumers are more likely to be older families with no children or the children have left home. © 2012 Bord Bia, The Futures Company 20 CHART 3 How long could you cover living expenses if you or someone in your household suddenly became jobless? (% of total ROI with debt) More than 9 months My level of debt is ruining the quality of my life (% of total ROI with debt) 48% Disagree strongly 22% 14% 14% 4% 2% 2% 7% 29% 27% 35% 44% Less than 1 month Agree strongly Source: The Futures Company, Feeling The Pinch 2012 (Unweighted base sample sizes ROI, PS n=40, CW n=114, AHOD n=169) Three key consumer groups Changing size dynamics across ROI and GB The shape of the consumer landscape is changing as more consumers are struggling to get by It is now three years since we first identified these groups, and we have seen changes in the make up of both the Irish and British marketplace (see Chart 4). In the ROI the „All hands on deck‟ group have become more prominent and now make up the largest segment in the country. The notable shift in size from 2011 highlights the growing pressure that is building on many households in ROI. Notably, the „Plain sailing‟ group remains largely unchanged over the same time period, highlighting that a stable and relatively wealthy group still remain in ROI. In GB the „All hands on deck‟ group continues to grow but remains at almost half the size of the group in the ROI. Whilst, the „Choppy waters‟ group is larger in GB than ROI, the most notable difference between the countries remains the size of the „Plain sailing‟ segment. Clearly, in terms of the market opportunity, the size and the wealth of the consumer base in GB means that it is an attractive export market: a factor that may also be helped by the weakening of the Euro against the Pound. © 2012 Bord Bia, The Futures Company 21 Note, the segment sizes have changed since the last report due to a change in the way the segments are calculated CHART 4 % total Republic of Ireland Great Britain 100% 100% 18 80% 34 36 40 60% 40% 48 39 20% 18 48 47 42 31 34 Mar 11 Jan 12 40% 20% 23 24 80% 60% 42 22 35 21 0% 0% Sept 10 Mar 11 Jan 12 Sept 10 Source: The Futures Company Feeling The Pinch 2012 (see appendix for base sample sizes) Three key consumer groups Cutting back on spending, staying in control and getting a deal will remain the mantra for the year ahead The pursuit of value is now an established consumer behaviour TABLE 2 As shown in Table 2, the majority of people in each consumer group are looking for ways to save money and make their money go further. PS % saying I am more likely to do this if my finances stay the same or get worse* in the next 12 months What is notable is the extent which all these value seeking behaviours span across the segments. The pursuit of the best deal is evident in everyone‟s lives whether or not it is driven by necessity, or out of the need to feel you are being a savvy consumer. The consumer‟s preference to purchase during promotions will remain strong across all consumer segments in to 2012. A difficulty for retailers and brand owners will be achieving differentiation in a market where promotions are an everyday feature. Equally, many consumers are beginning to question the motivations and value of some promotions and are becoming more attuned to how they are used to mask price increases. Key challenges in the year ahead will be how to differentiate between brands in this landscape, and working out how to use promotions in a way that creates standout and enhances consumers connection with the brand. © 2012 Bord Bia, The Futures Company 22 Action ROI CW GB PS CW AH PS CW AH Put off buying something until the sales 67 76 79 66 78 76 Settle for less than exactly what you want in order to save money 77 81 80 58 75 75 Buy supermarket own label products where I would have bought branded products in the past 76 79 89 75 85 85 Spend time shopping around for good deals 88 86 84 84 87 78 Go to a cheaper retailer 89 89 91 66 73 80 Search the internet for cheaper prices 80 83 87 79 85 87 Write out shopping lists 76 78 81 75 81 82 Buy grocery products in bulk 57 64 61 53 58 55 Use coupons and vouchers that offer money off the grocery products I buy 94 92 91 88 91 88 * 88% of ROI and 87% of GB consumers expect their personal financial situation to be the same or worse in 2012 Source: The Futures Company, Feeling The Pinch 2012 (see appendix for base sample sizes) AH Three key consumer groups Summary and implications Not all consumers have been affected by the financial crisis in the same way. Those businesses that are able to target the less affected consumers may still have room to build more premium offers or ensure that margins can be better protected by minimising promotional spend. A ‘good deal’ mindset resonates with all the consumer segments. It is unlikely that that the hunger of a good deal will disappear. As promotional activity has become an everyday event, it is harder to standout. Smart promotions that build engagement and offer a truly good deal for the consumer (rather than hide price rises) are likely to be appreciated by all consumers. A larger, less affected and affluent pool of consumers exists in GB than in ROI. Britain remains an attractive export market due to the size and relative stability of the „Plain sailing‟ segment. With a devaluing Euro against the Pound the attractiveness of Irish imports is likely to grow. It will be important to recognise that greater geographical variation in the financial situation of British consumers is likely to emerge in 2012. Many of the expected public sector job cuts are likely to impact the devolved regions of Northern Ireland, Wales and Scotland, and the Northeast of England the hardest. This will contrast the Southeast and East of England and are expected to be the least affected regions. Given the size of the markets, focusing on key regions or retailers with more advantageous regional footprints may improve the chances of success. “I’ve had to look for lesser paid, part-time work. Learning to live with a smaller budget causes stress” Female, 18-40 year old, GB North East “Since the recession I have certainly learned to appreciate money more and save money also” Male, 18-40 year old, ROI “I’m lucky to have a job at this hard economic time, but I do worry about losing my job and having no money to pay the mortgage and the bills” Male, 18-40 year old, ROI © 2012 Bord Bia, The Futures Company 23 Key challenges and opportunities Key challenges and opportunities Consumers need help finding new connections and meaning in life to lift the sense of gloom Despite the pressures on price, brands have a great opportunity to connect more deeply with consumers in today’s environment As consumers have retrenched into their own personal realities, life has lost much of its meaning. Disconnection is leading to a loss of purpose, leaving consumers feeling unhappy and unfulfilled. Brands at their best have always been great sources of inspiration, facilitators of change, and routes for connection. Room now exists for brands to fill some of the void in consumers‟ lives, something that if they can, is likely to be rewarded with loyalty and advocacy. Under this broader umbrella of connection we have also identified five „P‟s that outline how brands can help consumers in today‟s environment. They are not designed to replace the other „P‟s of marketing but add to them to help companies build better positioning and create better brand plans. Equally, it is not necessary for each brand to consider or embrace all five „P‟s; albeit it may be unwise to ignore them all. © 2012 Bord Bia, The Futures Company 25 New ‘P’s of marketing P P P P P PROTECTION: Protecting consumers from uncertainty and risk PRACTICAL: Helping consumers to plan and be more self-reliant PERMISSION: Encouraging consumers to make connections and see the positives of a life with less PURPOSE: Giving consumers new meaning and purpose to their lives PRIDE: Re-building a sense of pride and achievement Key challenges and opportunities Protection: Protecting consumers from uncertainty and risk The need to remove the risks of purchase or help consumers to manage risk in other parts of their lives. The financial crisis has lead to a more considered consumer. Consumers now approach life with more caution and trepidation, fearing that their circumstances may change or the potential for hidden financial risks in all aspects of their lives. As financial pressures continue to build, consumers have had to think twice before making even the smallest day-today purchases: Too many good deals seem to be misleading in order to hide price rises or lock the consumer in (meaning they ultimately part with more money). Companies and brands can help consumers by removing the risks of purchase, and being more clear about the nature of the deal on offer - its true benefits and downsides. Equally, there is scope to help more broadly by helping consumers be more flexible or by offering them advice in other aspects of their lives. Evidence “I find myself thinking twice before making even the smallest day-to-day purchases.” 72% 63% “If I buy something that is not on sale I feel like I have over-paid.” 61% 52% of Irish consumers agree of British consumers agree of Irish consumers agree of British consumers agree “I don’t trust large supermarkets Tesco, Asda, etc... because you think they are giving you good deals but they’re not as we all know e.g. A BOGOF last week in Tesco’s glade candles were 3for2 free but it cost £4.00 whereas a couple of weeks ago their original price was £2.00... Naughty, naughty.“ Female, 18-40 year old, GB Source: The Futures Company Feeling The Pinch 2012 (see appendix for base sample sizes) © 2012 Bord Bia, The Futures Company 26 P Key challenges and opportunities Protection: Protecting consumers from uncertainty and risk P Examples of companies removing risk and helping consumers manage uncertainty Create a resale value for everything Extend the range of advice you offer Take the risk out of trial Lockboxer is an online service which allows people to assess and track the value of their household possessions, so that they can decide if and when to sell or give away different elements of their household inventory. Next Door is a new Chicago-based café from insurers State Farm. Offering financial coaching and classes, the café is designed to help the company get closer to the local community. Between the knowledge required and the not-unsubstantial investment, choosing a new bottle of wine can feel like a risky endeavour. That‟s why San Franciscobased Brixr recently launched a set of tasting packs designed specifically for sampling. How can you create a resale value for ingredients consumers do not use? What other advice could you offer consumers based on your expertise and experience? What formats or channels can you use to allow consumers to experience your products without risk? © 2012 Bord Bia, The Futures Company 27 Key challenges and opportunities Practical: Helping consumers to plan and be more self-reliant Helping consumers become selfreliant by giving them greater control in all aspects of their lives. The broader goal of greater selfsufficiency and consequently, adaptability runs deeply through many parts of consumers‟ lives. Consumers exercise control by greater planning to keep on top of budgets or, to curb temptation in the face of a deal. Building skills such as cooking, offer consumers the means to make the most of what they have and maintain variety in their meals. Equally, the old maxim of „waste not want not‟ is becoming a core tenant to the weekly cycle of keeping spending down and managing budgets. Using what you have, often precedes new purchases. Any solutions brands can offer, which help consumers to be more selfsufficient through better planning, being more resourceful or gaining new skills, can ultimately win attention and create greater loyalty. Evidence “Since the recession I feel a greater need to be as self-sufficient as possible.” 76% 58% “I make better use of leftover food than I did a few years ago.” 66% 55% of Irish consumers agree of British consumers agree of Irish consumers agree of British consumers agree “I plan my shop by doing weekly meals plans and making daily lists on my kitchen board of what we run out of. I write my list in order of the shop layout as it makes it a lot quicker.” Female, 18-40 year old, GB Source: The Futures Company Feeling The Pinch 2012 (see appendix for base sample sizes) © 2012 Bord Bia, The Futures Company 28 P Key challenges and opportunities Practical: Helping consumers to plan and be more self-reliant P Examples of companies empowering people and helping them to be more practical Provide fast solutions to recipe needs Spanish food brand Gallina Blanca has launched an initiative which offers consumers free recipes based on the ingredients they have to hand. Consumers can send a tweet to Gallina Blanca listing the ingredients they have available. Gallina Blanca automatically searches its database for an appropriate recipe and sends a link to it in a direct message to the user. How can you help people make the most of the ingredients they already have? © 2012 Bord Bia, The Futures Company 29 Facilitate skill sharing Tailor advice and solutions Restolib‟ has established partnerships with more than ten restaurants in Paris, with an agreement that they may use the premises of those establishments after the restaurants have closed. The company makes use of those commercial kitchens to hold a wide variety of cooking classes, wine tasting sessions, table decoration workshops and more. Kraft Foods has partnered with Intel to create the Next Generation Meal Planning Solution kiosk, which is able to detect the number of people standing in front of it, plus their genders and ages. Based on this information, the kiosk suggests customised recipes and helps consumers plan meals with directions to relevant instore products. How can you create space for people to share skills or pass on your skills? How can you tailor choice to different types of consumers or help them navigate choice to get the best solution? Key challenges and opportunities Permission: Encouraging consumers to make connections and see the positives of a life with less Giving consumers the reasons to reach out and reconnect, and enjoy the things that are still good in life. The economic crisis has forced consumers to re-adjust their lifestyles, often changing the foundations on which their lives are built. With it has come disconnection; the values and social occasions that once bound friends together have evaporated often leaving a life without fun and meaning. Evidence “Since the recession I have learned how many things I can do without and still be happy.” 70% 53% “I've recently put off buying something I could afford because I didn't want to seem insensitive to my friends or neighbours with financial troubles.” 24% 18% of Irish consumers agree of British consumers agree of Irish consumers agree of British consumers agree For some there is shame that the good life has slipped through their fingers and they have some how become less than they once were. Consumers need permission to reach out again, either to connect with friends and family in different ways from the past or, to establish new connections with people who share their new values. Whilst consumers have lost a lot, they still have much to value in their lives. Helping them see and appreciate what they have can be a way to instil a more positive sense of perspective back into life. Source: The Futures Company Feeling The Pinch 2012 (see appendix for base sample sizes) © 2012 Bord Bia, The Futures Company 30 P Key challenges and opportunities Permission: Encouraging consumers to make connections and see the positives of a life with less P Examples of companies giving new reasons for consumers to connect and to have a more positive outlook Give permission to reach out Offer new reasons to connect Show that life with less is still rewarding The Pepsi Social Vending System lets users buy PepsiCo drinks for a friend remotely. Consumers choose a drink, enter the recipient‟s name and phone number into the touchscreen interface, and type a text message to be sent along with a unique code to the recipient‟s phone. Recipients of the gift enter the code into another Pepsi social vending machine to receive their gifted drink. According to Lantmannen, every fifth bag of food in Sweden is thrown away, which prompted the creation of Restdejting in an effort to reduce waste. Members are encouraged to combine their left over ingredients and create a meal with another person. Sainsbury‟s „living well for less‟ isn't just about great food. It also means making the most of the good things in life, sharing fun moments or maybe cooking memorable meals together. All without paying the earth for it. How can you help consumers reinforce their relationships through gifting? How can your brand or products be used as a reason to bring consumers together? How can you find simple ways for consumers to be happy? © 2012 Bord Bia, The Futures Company 31 Key challenges and opportunities Purpose: Giving people new meaning and purpose to their lives Rediscovering goals and purpose in life. Consumers need something to work toward, to drive them and give them purpose in life. Many of the goals set in prerecession times feel unachievable as financial pressures take over; the sense that many dreams are now out of reach is a common feeling. Without a goal or target to achieve, life can lack meaning. Consumers want to feel they are more than just getting by. Brands can play a critical role by giving consumers a new purpose in life. Brands can create new endeavours that require consumers participation or at the very least their suggestion of the best choice or task. Brands can also give people tools to create their own commercial value and gain both the rewards of completing a task and a financial return. Evidence “Some of the dreams I had for myself before the recession are now probably out of my reach.” 70% 53% “I'll never spend my money again as freely as I did before the recession.” 67% 48% of Irish consumers agree of British consumers agree of Irish consumers agree of British consumers agree “I’m very concerned as I have a teenage daughter growing up and feel like she has studied for nothing as I see my nieces and nephews struggle to get jobs...” Female, 18-40 year old, GB Source: The Futures Company Feeling The Pinch 2012 (see appendix for base sample sizes) © 2012 Bord Bia, The Futures Company 32 P Key challenges and opportunities Purpose: Giving consumers new meaning and purpose to their lives P Examples of companies giving consumers new goals and targets in their lives Create opportunities for consumers to contribute or have a say Unleash the entrepreneur Set new goals for consumers Detroit Soup raises money for creative endeavours through a monthly public dinner, where the diners also select which project to fund. For USD 5 they get dinner as well as the opportunity to hear four project proposals and vote for the one they think most deserves to be funded. The money raised that night is then given to the proposal that wins the most votes. Tweetjemee is Dutch web service for home-based cooks to serve people nearby. The idea is that anyone with cooking skills can prepare some extra food and sell this to others that do not wish to cook. After registration the chef can add a style and upload pictures with it, to give identity to his/her new online restaurant. French Onefeat is a social game that rewards users for performing and photographing specific off-line activities. Activities include “ride a roller coaster” & “visit your grandma”. To win points you perform the task and take a photo to prove it. Once the photo is uploaded, users earn points and trophies based upon the number of other users who like their photo. How can you encourage people to support new endeavours or ensure they have a say? What local causes or groups could you partner with? How can you help consumers create their own mini business? How can you give consumers new goals and objectives, however small? © 2012 Bord Bia, The Futures Company 33 Key challenges and opportunities Pride: Re-building a sense of pride and achievement Consumers have lost a sense of pride or lost sight of the things of which they should be proud In the recession, consumer pride has taken a knock. Uncertain job prospects, constant financial challenges, making compromises etc, are creating a constant stream of challenges and pressures. Seemingly, there is too little in life from which consumers can still take pride. But, pride can come from different sources. Personal achievements can help build a sense of pride; in the current climate achieving the smallest task can seem like a milestone. Pride can also come from a sense of community and what the community can build together. Brands can help reignite this sense of pride by making more of the small things we achieve in life. Or, by giving help to the communities in which we live; making sure that the community has a focal point or, the fabric that holds it together remains strong. Evidence “It is important to buy local products to support the economy, even if they sometimes cost more.” “Honestly I think we are too brow beaten, from years of heavy handed rule, either from colonial powers, from the church or from the recent yahoos. While we will give out about it, I think we have lost the fighting spirit.” 70% 50% of Irish consumers agree of British consumers agree “I see nothing different in the future. We are all so afraid of being made redundant that we can’t fight...” Male, 18-40 year old, ROI Male, 18-40 year old, ROI “The value of working with your hands and taking pride in learning a trade seems to have been forgotten about.” Female, 40+ year old, GB Source: The Futures Company Feeling The Pinch 2012 (see appendix for base sample sizes) © 2012 Bord Bia, The Futures Company 34 P Key challenges and opportunities Pride: Re-building a sense of pride and achievement P Examples of brands giving consumers a sense of pride around the small things in life Put pride into an everyday activity Enable people to re-build their local communities Encourage people to take a pride in their differences Cravendale plan to position dads as “milk heroes” picking up milk when it has run out. As part of the brands marketing strategy, they plan to partner with a sports radio station to also build engagement with men through sport. In collaboration with environmental regeneration charity Groundwork, 'Transform your Patch' is a community-led transformation programme which brings together the total portfolio of leading drinks brands. The objective is to help transform outdoor spaces nationwide, giving communities more access to outdoor sports, activities and fun. The Ale London Pride has begun an outdoor advertising campaign which aims to encourage visitors and residents of the capital to enjoy a pint of Pride as part of the real London experience. Their campaign takes a light hearted look at what people should and shouldn't do „When in London‟ and the characteristics of a true Londoner. Can you create everyday heroes out of the people that use your products? © 2012 Bord Bia, The Futures Company 35 How can you to help support and transform local communities? What are the foibles and quirks of the community you can celebrate? Technical Appendix Technical Appendix Primary and secondary research to unlock insight ECONOMIC ANALYSIS ONLINE FORUM QUALITY STATEMENT In order to build up an understanding of the macro context in which we were conducting our research, we carried out analysis of the Irish and British economy through desk research using a variety in internal and external resources. We recruited 24 respondents across Great Britain and Ireland to represent each of the three consumer groups we have identified (Plain Sailing, Choppy Waters, All Hands on Deck) across a range of lifestages and income brackets. The respondents were invited to fill in a series of online blogging exercises and group discussions as part of a one week rolling online forum All projects are completed in compliance with ISO 20252. CONSUMER RESEARCH Our consumer research consisted of an update of the Feeling The Pinch quantitative (FTP) survey together with an online forum element. FTP QUANT SURVEY The survey was carried out online with a nationally representative sample of 500 Irish adults (18+). The fieldwork was carried out in the last week of Jan 2012. Previous waves of the FTP survey have been carried in July 2008, June 2009, Nov 2009, Sept 2010 and Mar 2012. A similar survey has also been carried out in the UK with a sample of 1,000 adults. © 2011 Bord Bia, The Futures Company 37 All researchers / interviewers working on this project are fully trained in quantitative research methods and have been briefed on the requirements for this project in full. All research sessions were conducted in accordance with the agreed questionnaire. The analyst has kept accurate and descriptive records of the analysis process, to ensure than any analyses undertaken can be replicated at a later date. This document has been checked for accuracy of reported data and material. Technical Appendix Technical Appendix – Online Forum (2 of 4) Detail Notes Online forum content 7 days of content, each day comprising a mini-blogging task (e.g. Telling us about shopping habits) and a group discussion (e.g. Talking about effects of recession) Name of the online forum provider Dub Studios Name of the research consultancy The Futures Company Stimulus materials Available on request Duration of online forum From Thursday 5th January until Thursday 12th January Recruitment method \ incentive Forum provider handled recruitment Number of active participants 30 recruited for a total of 24 active participants © 2011 Bord Bia, The Futures Company 38 Technical Appendix Technical Appendix – Quantitative questionnaire (3 of 4) Detail Notes Questionnaire content The questionnaire content varies slightly each wave, the Feeling the Pinch study includes a number of core questions which are tracked wave on wave and some additional questions which are added for one or more waves only to track current topics of interest. Questionnaire length Approx. 20-25 minutes Name of the research provider Kantar Operations Name of the research consultancy The Futures Company Sampling method Quota sampling – Quotas set on age and gender (interlocking, 6x2 levels), Income (UK, 2 levels) and Social Grade (ROI, 2 levels), Region (4 levels) Unweighted sample size (n=) UK 2008 UK 2009 (Jan) UK 2009 (Nov) UK 2010 UK 2011 UK 2012 IRE 2008 IRE 2009 (Jan) IRE 2009 (Nov) IRE 2010 IRE 2011 IRE 2012 © 2011 Bord Bia, The Futures Company 39 2,268 2,110 1,002 1,010 1,014 1,007 500 545 501 506 501 503 Technical Appendix Technical Appendix – Quantitative questionnaire (4 of 4) Detail Notes Subgroup sample size Research methodology Self completion questionnaire shown online (CAWI) Country Year Segment Unweighted sample size (n=) UK 2010 Plain Sailing 385 Fieldwork dates UK 2008 UK 2009 (Jan) UK 2009 (Nov) UK 2010 UK 2011 UK 2012 IRE 2008 IRE 2009 (Jan) IRE 2009 (Nov) IRE 2010 IRE 2011 IRE 2012 Choppy Waters 418 All Hand on deck 207 Plain Sailing 356 Choppy Waters 431 All Hand on deck 227 Plain Sailing 347 Choppy Waters 422 All Hand on deck 238 Plain Sailing 124 Choppy Waters 192 All Hand on deck 190 Plain Sailing 96 Choppy Waters 212 All Hand on deck 193 Plain Sailing 94 Choppy Waters 195 All Hand on deck 214 August 2008 January 2009 November 2009 September 2010 March 2011 January 2012 August 2008 January 2009 November 2009 September 2010 March 2011 January 2012 Weighting details Post-stratification. Data weighted back to sampling quotas. Weighting efficiency UK 2008 UK 2009 (Jan) UK 2009 (Nov) UK 2010 UK 2011 UK 2012 IRE 2008 IRE 2009 (Jan) IRE 2009 (Nov) IRE 2010 IRE 2011 IRE 2012 92% 95% 97% 98% 100% 100% 62% 76% 55% 98% 89% 88% 2011 2012 IRE 2010 2011 2012 * A revision to the segment definition in 2012 improved the solution. The improved solution was applied for all segments 2010 to 2012. © 2011 Bord Bia, The Futures Company 40