Even though official data says Canada is not in recession, 53% of the population feel they are in it. This state of mind is changing purchasing behavior to the point of having caused a “consumer recession” that worries the food industry. But all is not gray, because we may be adopting some good habits.
The term “consumer recession” was coined by the research firm NielsenIQ (now NIQ) which analyzes purchases made around the world. She talks about the time when people were more on the lookout for sales, turned to house brands, preferred low-cost groceries and stopped buying certain foods altogether because of their price. All this in a context of sustained inflation.
This is exactly what is happening with us today. And the various indicators that make it possible to determine the extent of the phenomenon have increased compared to the end of 2022. Its “level” is now 77% (+ 4 points in three months). NIQ considers that there is a “consumer recession” when the 50% mark is crossed.
“Instead of buying chicken breasts, consumers choose drumsticks and they buy less fine cheeses,” says Francis Parisien, senior vice-president of sales for SMEs in Canada at NIQ.
It wouldn’t be surprising if the trend continues, because clearly we are not out of the woods when it comes to inflation. After the lull of the last few months, the consumer price index started to rise again in April. In Quebec, prices jumped 4.8% compared to last year.
In supermarkets, it is much worse, the increase reached 9.1%. No wonder 56% of Canadians say they’re concerned about food prices, according to NIQ. By comparison, the rate was 47% last summer.
Concretely, this concern translates into a 2% drop in the number of items put in grocery carts across the country. In Quebec, a group of 5,000 people who send the details of all their purchases to NIQ revealed a drop in volume of 6%.
In 20 years of career, this is the first time that Francis Parisien has observed a decline in the number of items sold. This is all the more surprising given that the country’s population is constantly growing.
Canned foods are particularly badly hit, although they have always had a reputation for being economical.
The sales volume of canned fish fell by 14% in Quebec. Baked beans (-8%), sauces of all kinds (-4%), tomatoes (-3%) and soups (-3%) have suffered a similar fate for a year.
Historically, we turned to this category to save, but here, it is quite the opposite that is happening. This unprecedented phenomenon is explained by the increase in the price of containers – made of steel, sometimes aluminum – which has had an impact on retail prices in grocery stores. The trend is observed all over the world.
In Quebec, the data also show that people buy less fruit and vegetables (-5%), less meat and seafood (-7%), less baked goods (-7%).
“We have 49% of consumers who say they only buy the essentials, the basics,” said Francis Parisien during a CTAQ event, giving the example of milk, eggs, coffee and bread.
In terms of personal finances, this drop in volume is frankly interesting. Because it partly explains why monthly household spending on groceries has hardly changed for two years, despite inflation and the population increase of 1.5 million people. It sells about $12 billion worth of food per month through retailers, and has done so for the past two years.
This astonishing stagnation in sales did not escape Professor Sylvain Charlebois of Dalhousie University. Statistics Canada does not provide explanations, but the food industry expert believes households are wasting less food. To avoid throwing away, they got better at managing inventory in their fridge. A most logical assumption given that waste is less in countries where food is expensive. If this is the case, it is obviously excellent news for the planet and the household budget.
Choosing house brands and low-priced supermarkets like Maxi and Super C and cutting back on pantry supplies are three other strategies that appear to be contributing to sluggish sales.
Since we are focusing on the essentials, we are also reducing the purchases of processed foods (cookies, chips, chocolates, soft drinks) by multinationals such as Nestlé and PepsiCo, reveal their most recent financial statements. Nutritionists wouldn’t mind (unless a private label substitute was chosen). Neither does our wallet.
Of course, inflation also causes a range of problems, such as increased use of food banks and many nutritional trade-offs as quality food costs more. If food inflation continues, it could even have long-term effects on the health of individuals, in particular that of children, fears Sylvain Charlebois.
So let’s keep our fingers crossed so that a real recession does not increase the challenges of these households, which have already been hit hard by the economic situation.