Financial pressures on households across the globe have triggered a sustained and steep decline in consumer confidence, according to market research multinational, Ipsos. Its Global Consumer Confidence Index recorded a 0.7 point decline, between December and November of 2024, putting it at just 47.9 points. This is the second consecutive decline, setting it at 1.5 points lower than the beginning of the year. And this trend is being felt particularly strongly across Europe.
“Sentiment is generally down among European countries,” says a spokesperson for Ipsos.
Furthermore, some of the biggest drops have been observed in the largest economies, with Germany down 3.9 points, France down 3.7 points, Belgium down -3.3 points, Great Britain down -2.8 points, and Poland down -2.7 points.
And it appears to have been trending down for some time, with Trading Economics reporting that consumer confidence in Europe has been declining steadily for 10 years.
This is bad news for all FMCG brands, including those in the food and beverage industry, as this decline in confidence brings an inevitable decline in spending.
“Consumers' sense of financial wellbeing and confidence remains down,” says Alice Baker, food and drink analyst at Mintel.
And the outlook for the immediate future remains negative.
“We expect weak consumer spending in the eurozone to persist,” says Oxford Economics.
So, what does this mean for food and beverage and what can the industry do to meet changing consumer demand?
What does this mean for the food and beverage industry?
While consumers will not stop buying foods and beverages, the specific products they are buying are changing, with a very noticeable move towards lower cost versions of the same products. This is proving to be a big win for private label ranges.
“Many are downgrading their choices across categories and opting for lower-cost private label (PL) products,” says Carmen Morales Garcia, partner for consultancy firm, LEK.
But where private label might once have been perceived as the second-rate option, increased consumer interest has led to increased investment from retailers, with a focus on quality and variety.
“Retailers have worked hard to invest in their private label strategies and shift the perception beyond basic value-for-money options,” says a spokesperson for market insight firm NIQ. “This has included introducing wider ranges of products.”
However, while retailers are reaping the rewards, with rising sales of private label products, independent brands are feeling the pinch.
“This makes it all the more important for brands to be proactive in getting themselves onto shoppers' radars,” says Mintels’ Baker.
The decline in confidence has also led to a rise in consumer downtrading. This is the move towards more economical products and alternatives categories. One area where this downtrading trend is particularly evident is within the meat sector, with the rise in sales of cheaper protein categories such as chicken and frozen pork, at the expense of more expensive proteins such as fish and beef.
How can food and beverage adapt to reduced consumer spending?
Despite a continued decline in confidence, and spending, the food and beverage industry remains vital to consumers. But to ensure continued success, brands and retailers must continue to adapt in order to survive the changes in spending behaviours.
One way to do this is by shifting focus over to innovation and NPD, to tempt consumers and encourage growth.
“Now is the time to re-strategise, placing innovation, consolidation and internationalism at the top of their agendas,” says LEK’s Garcia.
Diversification is also vital for brands to ensure continued success, with some already proving the benefits. Spanish food processor Campofrío, in particular, stands out for its product diversification moves, strategically expanding its product line from predominantly pork to include more affordable turkey-based offerings.”
Diversification to satisfy trends is also a fast and effective way to boost sales, with brands currently focusing on the rising health and wellness trend.
“To meet the increasing demand from consumers for healthier options, the industry should consider diversifying its product range, emphasising clean-label and natural products,” says a spokesperson for supply chain specialists, Unipart Consultancy.
Furthermore, brands should be taking a global approach to operations, looking beyond the borders of Europe.
“We are much more global than we’ve ever been,” says Neil Chapman, head of private sector for Unipart Consultancy. “Focus is not just on the UK or Europe anymore, focus has shifted to interactions and movements all over the world, think global act local.”
Meanwhile retailers will likely continue to tap into the growth opportunities within the private label sphere.
“Consumers and retailers are seeing the value of own-label products,” says a spokesperson for food and beverage merchandiser, Dee Set. “Because of this, retailers will continue to expand their efforts expanding and freshening up their offerings.”
Consumers are also increasingly demanding value for money and, when it comes to purchasing decisions, “good value for money is more important than low costs,” says Will Cowling, marketing manager of FMCG Gurus.
Inclusion in loyalty schemes is a good way for brands to tap into shoppers' love of getting a bargain, while protecting their margins better than more generic promotions
Alice Baker, Mintel
And on that subject, this is a good opportunity for brands and retailers to develop new loyalty schemes to encourage shoppers to spend.
“Inclusion in loyalty schemes is a good way for brands to tap into shoppers' love of getting a bargain, while protecting their margins better than more generic promotions,” says Mintel’s Baker. “Discounts as part of a loyalty scheme have prompted 43% of grocery shoppers to buy either a previously bought or a new brand.”
Financially challenging times often lead to increased M&A activity in food and beverage. And acquisitions are a fast and effective way for larger brands to increase their product ranges, along with a whole host of other benefits.
“Consolidation can support firm performance during economic downturns by helping streamline operations, diversify offering portfolio, cut costs, access new markets and eliminate redundancies,” says LEK’s Garcia.
It’s clear the food and beverage industry is facing challenging times, and not just because consumer confidence is dropping, but what’s equally clear is the opportunity to strengthen and grow.
