Rabobank Report Highlights Success Factors For Food Retailers In Current Market
The report, Food Retail: Sailing Through Turbulent Waters, shows that despite the U.S. economy’s slowdown, consumer food purchases continue to be driven by factors other than price. Despite the higher food prices projected for 2009 and beyond, consumers are budgeting more for food and increased price sensitivity may force high-end retailers to reevaluate their strategies.
The results of this study show that some consumers are price sensitive and are now purchasing more cheaply priced foods. Some others are willing to pay higher prices for convenient, organic foods, or other foods that they perceive to have additional value, although this may change over the next few months.
To date, consumers have been insulated from the rising commodity costs, protected by commodity hedging contracts that food processors have had in place. However, as these expire, both food processors and consumers will be paying more. This rising costs will likely make consumers more price sensitive and differentiation strategies will become more important.
The dominant consumer priorities in making food purchases include health, convenience, and price. Consumers are now focusing in one of these priorities and abandoning the others, creating a trend called “barbelling.”
The offering of healthy options may become a less effective differentiation strategy. Those successful in this market are combining health and other differentiators such as price, gourmet offerings, and convenience. Achieving the right balance of product attributes is the key to success.