The cost-of-living crisis is fuelling demand for affordable indulgence

Despite efforts to curb food spending, consumers are increasingly on the lookout for affordable indulgences to enjoy at home or on the go. To offset a reduction in spending in the foodservice sector, almost half (46%) of consumers are seeking premium products and treats at retailers, FMCG Gurus data shows. A further 41% have upped their spending on bakery items such as cake and pastries in recent months.

The surge in demand for indulgent treats presents an opportunity for food brands to offer products that deliver affordable pleasure while satisfying the premium retail market. Seeking pleasure and escapism from food, global shoppers are prioritising small and frequent luxuries, with close to three quarters (73%) reportedly opting for indulgent treats at least once per week, according to FMCG Gurus.

Rising sugar prices could offset consumer demand for sugary treats

The rising cost of sugar, however, could present a challenge to food manufacturers hoping to boost their production or sales of sweet snacks in the coming months.

Since August 2021, the price of sugar has soared, up 61% in February and March 2023 in the EU. Czechia (98%), Estonia (97%), and Poland (82%) are amongst the countries the worst affected by the sugar price spikes in the European unio (EU), data from the EU commission shows. The same was observed globally as the sugar price index hit 127 in March, the highest since October 2016, according to a report by the FAO.

Some brands are responding to the steep rise in the price of sugar by boosting the cost of various products including ice cream, confectionery, and beverages across the world. In South Korea, the price of a 350 millilitre can of the popular soda Coca-Cola rose by 5%, and Lotte Wellfoods Pepero cookie sticks and World Cone ice cream rose by 13.3% and 20% respectively.

Last February, Coca-Cola announced plans to raise the price of its sodas at a moderate pace across the world in 2023. Last year, the brand’s average selling price rose by 11%, compared to competitor PepsiCo, whose prices increased by 14%, according to Reuters. Following a fall in demand in Europe during the last quarter, unit case volumes for the soft drink reportedly fell by 1%.

Consumers look to curb their spending on food and drink products

As inflation rates continue to fluctuate globally, many consumers are adopting recessionary style behaviours to combat the rising cost of living. This has led to reduced spending on non-essential food costs, such as dining out at restaurants and cafes. According to a recent survey conducted by market researcher FMCG Gurus, close to eight in ten (77%) global consumers have reduced their spending at restaurants and cafes over the last six months in response to rising food prices.

Last month, the Food and Agriculture Organization’s (FAO) price index, which monitors the price of global food commodities, rose for the first time in a year from 126.5 to 127.2 points. Despite the recent falling cost of certain foodstuffs including dairy, cereals, and vegetable oils, consumers are currently facing hikes in the price of sugar, meat, and rice.

This is causing concern amongst consumers, with 59% of global consumers displaying uncertainty in their financial savings, according to FMCG Gurus. Research by Barclays bank found that the vast majority (88%) of UK consumers were concerned about rising food prices, with 62% looking for ways to reduce their spending on groceries, which climbed by over 7% in March.