White brands are getting heavier in a shopping basket that Spaniards are filling with fewer and fewer products
The rise in energy prices is beginning to take a heavy toll, not only on consumers’ wallets, but also on their consumption habits. By allocating the bulk of the household budget to electricity bills, other cuts had to be made, as confirmed by the Bank of Spain in a report published this Tuesday, in which the agency warns that this situation is particularly noticeable in households with a lower income.
It is true that the energy consumed is ultimately a basic need good. For this reason, the Bank of Spain explains that “given the increase in their costs, families will tend to adjust their demand insignificantly and, on the contrary, will reduce their spending on other goods or their level of savings.”
The institution confirms the strong link between households’ nominal spending outlook and inflation. And, faced with runaway prices of 10.8% in July, the savings rate will also be cut… in those cases that have room for maneuver.
“Household prospects for income development and economic growth have been negatively impacted by the war in Ukraine. Both variables, as well as the expected evolution of inflation and, for indebted households, that of interest rates, determine households’ expectations about the prospects for their financial situation, which has deteriorated to some extent since the beginning of this armed conflict.” the organization states in its report.
In particular, the current situation seems to have influenced the spending outlook more on some specific items. This is the case with spending on durable goods, which, as the experts note, is “usually more affected by periods of upswing in uncertainty, deterioration of household wealth or reductions in purchasing power.”
This situation forces families to postpone their purchasing decisions, as is already happening in the car market, for example. Registrations fell 12.5% in July (traditionally a very positive month for the industry), with the individual broadcaster accounting for the bulk of the decline.
According to data from the Bank of Spain, consumers have already lowered their spending expectations for household appliances and cars in recent months “and especially since the start of the war”.
In contrast, the outlook for holiday spending continued to recover in the heat of the lifting of restrictions related to the pandemic. But in lower-income households, which have had to spend most of their budget on energy expenditure, this situation has not been the case. The Bank of Spain here includes households with low mattresses, which are households that do not have (or somehow cannot obtain) sufficient liquidity to cover unforeseen expenses corresponding to an amount equivalent to one month’s household income.
The same is happening with durable goods in the shopping cart, given the obvious shift that the rise in energy prices has already had towards food, with a particular impact on basic necessities. This situation has also led to a change in consumer behavior in the supermarket. According to a study by consultancy Gelt, fewer products are bought every time you go shopping, you choose the cheapest and white brands arrive in the shopping cart.
Specifically, between June 2021 and the same month in 2022, there was a 23.6% decline in the number of products included on average in a purchase. Yet the average spend per transaction has increased by 8.3% in one year, forcing consumers to make smaller purchases with the same or slightly higher budget.
All foods experienced overall increases over the period analysed. 25.8% on average, with bread, grains, flour and some fruits and vegetables being the most notable from day to day.
Another consumer response to the rise in the cost of staple food and cleaning products is the choice of white brands over premium or manufacturer brands. The trend in this sense is growing: last June these brands had 3.2% more share of purchases than their usual average. Remarkably, according to another Gelt report published in April, the white brands also increased their prices by 8% over manufacturers’ prices: 18% against 10% respectively.
“Consumers are responding by trying to adjust their spending, which has a bigger impact on brands: I think we’ll see less loyalty, more price-oriented decisions, elimination of erratic and not-so-necessary products and a tendency to look for offers . The increase in the share of white brands is an example of this,” said José Luis Varela, Global Head of Data at Gelt.
Source: La Verdad
I’m Wayne Wickman, a professional journalist and author for Today Times Live. My specialty is covering global news and current events, offering readers a unique perspective on the world’s most pressing issues. I’m passionate about storytelling and helping people stay informed on the goings-on of our planet.
