The report, Food Flavors and Ingredients Outlook 2009, highlighted a “genuine value shift” in the US brought about through a combination of widespread economic woe and the election of Barack Obama as President.
“Whereas the beginning of the decade will be remembered as an era of greed, the end of the decade will be marked by a return to a culture of responsibility,” said the report. “…It will be key for marketers to understand the mindset of consumers to make sense of and leverage the belt-tightening approaches they are likely to pursue.”
Smaller package ‘backlash’
The report warned manufacturers against shrinking portion sizes as a way to make higher ingredient costs less noticeable, and said that at a time when many consumers will be making decisions based on compromise, smaller packages bring “the potential for a backlash”. It cited a Nielsen Panel Views study carried out last year, which found consumers would prefer to pay a higher price for the same sized package rather than buy a smaller portion at the same price, as long as the per portion price still represented good value.
“In making tradeoffs in 2009, consumers will become more aware of manufacturers downsizing packages and factor this into their decision making,” it said.
Retailers push back
While the report acknowledged that manufacturers look set to be squeezed in the coming year, with food prices expected to rise by 3.5 to 4.5 percent, it said that they should also prepare for “more push back from retailers”.
Retailers are also complaining about higher prices from their suppliers, the report said, adding that they have been pointing at strong results from many major food manufacturers in the third quarter of 2008 as a reason to reject food price hikes.
Consumers, meanwhile, will change some of their spending patterns in 2009, it said. In the past, recessionary spending has involved buying fewer perishable food items, and Packaged Facts expects consumers to turn to staples like rice, beans and pasta instead.
Coupons are consumers’ top strategy for saving money, however, and the report cites a Nielsen study conducted last year, which showed 22 percent of consumers plan to use them to cut grocery bills.
On the other hand, the report highlighted several areas expected to grow in the year ahead, with US interest in ethical issues high on the list, particularly fair trade, as it moves “beyond coffee, tea and cocoa”.
Other key areas to watch are sweeteners positioned as ‘natural’, such as stevia and agave, and digestive health, which the report claimed would be “the number one health and wellness area in 2009, with emphasis on probiotics, prebiotics and fiber.”
Packaged Facts also expects that satiety, reduced-calorie and removal of artificial colors and flavors will continue to be important areas for processed food manufacturers, especially as nutrition information moves front-of-pack.