The food and beverage (F&B) landscape has undergone significant changes since early 2023; while geopolitical tensions persist, combative monetary policy and adaptive supply chain disruption management have relieved recessionary pressures, showing signs of increasing economic resilience. Reflective of this economic shift, F&B inflation has drastically fallen from its peak of 19.2% in March 2023 to 1.5% in July 2024 (ONS, 2024), its impact on consumer behaviour remains palpable. This evolving environment has prompted a shift in shopping habits, brand loyalties, and product preferences within the Food & Beverage (F&B) sector. Drawing on insights from the 4C 2024 F&B Survey, we’re examining how changing economic conditions are reshaping consumer choices in food and drink purchases. We explore how easing inflationary pressures have influenced shoppers’ price sensitivity, and how factors such as product range and sustainability now play an increasingly important role in purchasing decisions. Furthermore, this analysis provides actionable strategies for food and beverage companies to adapt to these new consumer trends, helping them maintain customer loyalty and drive growth in this dynamic market.
From Cost-Conscious to Value-Seeking: The Evolving Consumer Landscape
The 4C 2024 F&B Consumer Survey reveals a noteworthy shift in consumer priorities as compared to the previous year. While cost remains the most influential factor in consumers’ choice, its dominance has waned. In 2023, 72.3% of respondents cited cost as the primary factor influencing their decisions. However, this figure has decreased to 63.8% in 2024, marking an 11.8% decline. Concurrently, the importance of product range has surged, becoming the second most crucial factor; with 16.5% of respondents citing, it as the most crucial factor – a remarkable 126% increase from 2023.
This shift from cost consciousness to a more balanced value-seeking approach may be attributable to increased economic stability, with over 35% of consumers surveyed having seen an increase in income over the past year. Factors such as easing inflation, stable interest rates, and modest growth in real wages and GDP have contributed to a significant boost in consumer confidence. The GfK Consumer Confidence indicator shows a healthy rise of 31 points, from -45 points at the start of the year to -14 in June 2024. Despite the index continuing to reflect cautious sentiment, this improved economic outlook has allowed some consumers to become less focused on price alone and more interested in the overall value proposition.
Consumer Product Preferences
Our survey also highlights that products with specific health or sustainability-related characteristics continue to be important to consumers, but with notable shifts in priorities. High protein has consistently grown in importance, from the 2nd least important specification in 2022 to the most important in 2024, with over a third of consumers placing it in their top 3 specifications. While locally produced products soar in importance, from 2nd least important for 2 consecutive years to the most important this year, with 27.8% prioritising locally produced products as their number one choice for sustainability related factors.
Nevertheless, as the economic landscape stabilises, consumers are showing a nuanced approach to premium pricing. While cost consciousness has eased, value-seeking behaviour has become more prevalent. For instance, 58.7% of consumers are willing to pay a premium for organic products; with 29.4% willing to pay 5% more and 21.8% willing to pay 10% more. Moreover, an impressive 61.3% of consumers are willing to pay a premium for whole foods/minimally processed items; with 22.1% willing to pay 5% more and 26.0% willing to pay 10% more. This suggests that while consumers are still price-sensitive, they are more discerning about where they allocate their spending. However, it’s important to note the ‘say-pay gap’; where the consumer’s intention to pay more doesn’t always translate at the point of purchase. This discrepancy highlights the challenge for brands to translate consumer intent into concrete purchases.
Despite the growing health consciousness among consumers, our survey reveals some surprising trends in product preferences. Low-calorie options have consistently remained at the bottom of consumer priorities, ranking as the least important factor for the third consecutive year. This persistent lack of interest suggests that calorie content alone is not a primary driver of food choices for most shoppers. Even more unexpectedly, given the recent surge in awareness about the potential health risks of ultra-processed foods, whole foods or minimally processed items ranked as the second least important factor. This finding presents a complex picture of consumer behaviour, where general health trends don’t always align with specific product preferences. It suggests that while consumers may express concern about processed foods in principle, this doesn’t necessarily translate into prioritising whole food options when making purchasing decisions. These insights highlight the nuanced and sometimes contradictory nature of consumer preferences in the food and beverage sector, underscoring the need for brands to look beyond surface-level trends when developing product strategies.
In the realm of sustainability, consumer priorities have undergone a significant shift in 2024. The surge in importance of locally produced goods underscores a significant consumer shift towards products that reduce carbon footprints and support local economies. Recyclable packaging, while remaining a high priority, has been displaced from its leading position in 2023 to become the second most important sustainability characteristic. Similarly, Fairtrade certification has seen a slight decline in relative importance, moving from second place in 2023 to third in 2024. Notably, these top three sustainability factors – local production, recyclable packaging, and Fairtrade certification – are all prominently displayed on product packaging, which may be a driving force behind their sustained importance to consumers. This visibility allows shoppers to make immediate, informed decisions aligned with their sustainability values, highlighting the critical role that transparent communication plays in influencing consumer choices in the current market.
However, this increased awareness hasn’t translated into a willingness to pay premiums for these features. In fact, consumer reluctance to pay extra for sustainable products has grown. Compared to 2023, there’s been a decrease of nearly a third in consumers unwilling to pay a premium for products with recyclable packaging. Similarly, the number of consumers unwilling to pay any extra for Fairtrade products has risen by 17.2% since 2023. This trend suggests that while sustainability is increasingly valued, consumers expect these practices to be standard practice rather than premium features in their food and beverage choices.
What does this mean for Food & Beverage brands?
Balancing Cost Management with Product Diversification
While cost remains the most significant factor for consumers in 2024, its influence has decreased compared to previous years. This shift highlights an emerging trend where consumers are placing greater importance on the variety of products available. To remain competitive, food and beverage companies must maintain competitive pricing while also exploring how to expand their product offerings to those seen as valuable to consumers. Effective cost management strategies, such as strategic sourcing and optimising supply chains, are essential to achieving this balance. Streamlining procurement processes and enhancing forecasting accuracy can also reduce costs. Cost savings for brands could then free up funds to invest in R&D to enhance product range in accordance with consumer demands.
Improving supply chain efficiencies is crucial for minimising wastage and optimising inventory management. Refining logistics networks can lead to significant cost reductions, allowing companies to offer a wider array of products at competitive prices. These measures not only help in maintaining profitability but also in meeting the evolving demands of consumers, who seek both value and variety. Despite the growing importance of these product attributes, consumers increasingly expect them to be standard features rather than premium offerings. There is a notable trend of shoppers being reluctant to pay extra for products with specific health, nutrition, or sustainability characteristics, reflecting a shift in perception where these attributes are seen as essential components of quality products rather than luxury add-ons. Across the health and nutrition specifications, on average, there has been a 22.8% increase in consumers unwilling to pay anything extra for them since 2023. Thus, brands are faced with the challenge of offering products with these health attributes at a price parity with standard offerings. This trend further underscores the importance of procurement and supply chain efficiency, as brands need to manufacture at a cost level that allows them to offer these enhanced products without the need for premium pricing to protect profit. Achieving this requires a holistic approach to cost management, from strategic sourcing of ingredients to streamlining production processes. By focussing on these areas, companies can meet consumer expectations for both desired product specifications and affordability, maintaining competitiveness in a market where consumers demand more but are less willing to pay for it. This scenario highlights how effective supply chain management is not just an operational concern but a key driver of market success and consumer satisfaction.
Embracing Evolving Sustainability Trends: The Pricing Paradox
Sustainability continues to be a growing concern among consumers, and companies must respond by integrating more environmentally conscious practices into their operations. However, with 59.4% of consumers unwilling to pay extra for sustainability and ethical specifications, 16.6% more than last year, it is crucial for brands to implement cost-effective strategies, so sustainability goals are met without passing on cost increases to consumers.
This year, locally produced products have surged in importance, rising from the second-least important factor for two consecutive years to the most crucial in 2024. To align with these shifting priorities, food and beverage companies could focus on localising their production and manufacturing processes without reflecting marginal costs in consumer pricing. This approach requires a delicate balance of efficiency and strategic sourcing but would also support supply chain resilience strategies. Companies can explore partnerships with local farmers and producers to secure a steady supply of ingredients, invest in regional distribution centres to reduce transportation costs, and leverage technology to optimise local supply chains.
Additionally, brands could tap into government initiatives like the UK Shared Prosperity Fund, which aims to support local businesses and boost regional economies. For EU-based companies, similar support can be found through the European Regional Development Fund (ERDF) or the LEADER program for rural development. On a global scale, various countries offer local business support schemes, such as the United States’ Small Business Administration grants or Australia’s Regional Growth Fund. By utilising such resources, F&B companies can enhance their local production capabilities while maintaining cost competitiveness. Furthermore, emphasising the local origin of products in marketing campaigns can resonate with consumers, who are increasingly valuing provenance and supporting local economies. This strategy not only addresses the growing demand for locally produced items but also potentially reduces overall supply chain vulnerabilities and carbon footprint, appealing to both cost-conscious and environmentally aware consumers.
Sustaining Brand Loyalty through Omnichannel and Customer Functionality Efforts
In 2024, brand loyalty has seen a significant resurgence, with 72.5% of consumers reporting that their preferred shopping brands have remained unchanged over the past year. This represents a notable increase of 37.8% from the previous year, where only 52.6% of consumers indicated no change in their preferred shopping brands. This rise in brand loyalty may be attributed to targeted investments by food and drink manufacturers in two key areas: personalised experiences and seamless omnichannel integration.
Leading brands in the industry have exemplified these strategies through innovative campaigns and product launches. For instance, some have leveraged social media platforms for exclusive product releases, combining unique flavours with interactive digital experiences to engage younger consumers, such as Coca Cola’s launch of Happy Tears, exclusively on TikTok shop, accompanied by a TikTok filter to amplify engagement amongst the target audience. Others have focused on creating direct-to-consumer experiences through their online stores, offering speciality products and exclusive content to drive engagement.
Moreover, many food and beverage companies are excelling at integrating online and offline experiences. Common strategies include developing apps and websites that offer tailored promotions and digital coupons redeemable in physical stores, ensuring a seamless and personalised consumer journey. For instance, Heineken’s ‘Star Serve’ program combines online training with real-world application, and their Heineken Experience app enhances physical visits with digital content, offering an immersive, interactive brand experience. By combining exclusive product offerings with effective omnichannel strategies, these brands are strengthening consumer loyalty and driving repeat purchases in the competitive consumer products market.
The food and beverage industry faces a transformed consumer landscape; while cost remains a significant factor, consumers are increasingly prioritising product range, health attributes, and sustainability, but without the accompanying willingness to pay premiums for these features. This shift presents both challenges and opportunities for F&B companies. To thrive in this evolving market, businesses must strike a delicate balance between cost management and product diversification, embrace sustainability without premium pricing, and leverage omnichannel strategies to boost brand loyalty. The ability to offer locally produced and high-protein products, while maintaining competitive pricing, will be crucial. Companies that can adeptly respond to these changing consumer preferences, integrating cost-effective sustainability practices and enhancing customer experiences, will be best positioned to maintain customer loyalty and drive growth in this dynamic market. As economic recovery continues and consumer priorities evolve, agility and strategic adaptation will be key to success in the F&B sector.
If you would like to understand how 4C can help your organisation navigate through economic recovery and leverage shifts in consumer preference, please reach out to our Head of Consumer Products Katy Gallagher.