American Lifestyles 2013: Five Years Later reviews how consumer behavior has changed over the past five years as a result of the economic downturn and how these changes have impacted spending across all consumer markets. The report examines how markets have weathered the recession and also speculates on how they will fare over the next five years and which sectors within categories will drive growth.
Total US sales of food for in-home consumption rose from $260 billion in 2007 to an estimated $294 billion in 2012, a 13% increase. Chocolate and confectionery have been big winners. The number of consumers eating candy (including chocolate) was at a five year high in mid 2012, with 82% of Americans admitting they had eaten chocolate or other candy. Meanwhile, snacking is now a way of life for increasingly on-the-go Americans, with snack food sales increasing by nearly 30% from 2007-12. Yogurt has proved to be another winner, with growth of more than 40% from 2007 through to 2012 to reach $7 billion in 2012. “In addition to economic influences, concerns with the healthfulness of dining out—and the broad perception that cooking at home is a more healthful approach to meals—have also kept consumers in their kitchens. Meanwhile, cooking meals has become a way to spend quality time with family and show affection for one another while allowing consumers to build cooking skills, which are admiration-worthy—take note of the increase in cooking and reality shows as well as the ‘celebrity chef’ trend,” says John Frank, category manager, CPG food and drink at Mintel.
Mintel estimates that the restaurant industry grew nearly 14% from 2007-12 ($377 billion to $429 billion) despite a poor economy affecting the amount of discretionary income many consumers had, and making going out to eat a luxury for many, Nearly a third ( 33%) of consumers say they are spending less on dining out now compared with a year ago. However, despite economic hardships, consumers continue to dine out, which shows that eating out is a part of the American lifestyle. “Consumers would rather trade down and take advantage of value pricing, discounts, and promotions instead of give up dining out. Continued worries about the economy will make getting the best deal possible when eating out a continued necessity,” concludes Julia Gallo-Torres, category manager, foodservice at Mintel.
While 30% of those surveyed believe they are spending less on alcohol at home in 2012 compared to 2011, U.S. retail sales of alcohol have benefited from a recession-induced move away from on-premise alcohol consumption. Indeed, some 37% of respondents reported a reduction in on-premise alcohol purchases. From 2007-12, Mintel estimates that total on-premise alcohol expenditures increased by 11%, reaching sales of $77 billion in 2007 and netting an estimated $86 billion in 2012 (the least growth of any food or drink category, including dining out). Slightly more than half (52%) of the 29% of respondents who are cutting back on the amount of alcohol they are purchasing for at-home consumption do so to save money. “The category’s steady performance is at least partially propelled by Millennials of legal drinking age who are willing to try new products and consume beer, wine and spirits nearly equally. Across all generations, retail sales of alcoholic beverages have benefited from consumer embrace of at-home drinking, which has become a habit following its emergence during the recession,” says Jenny Zegler, beverage analyst at Mintel.
While 15% of consumers believe they are spending less on non-alcoholic beverages at home, many consumers are finding ways of saving money rather than abandoning purchases. Energy drinks have been the fastest-growing segment in retail sales of non-alcoholic beverages between 2007-12, nevertheless, some 83% of adults aged 18 and over do not use energy drinks. “Ongoing pressures from the economy, increased product prices, and the obesity epidemic are causing some consumers to reevaluate the necessity of their non-alcoholic beverage purchases. In calorie-laden segments, consumers are swapping full-calorie for diet beverages. Overall, consumers are looking for ways to quench their thirst without the additional guilty feelings about breaking either their budget or their diet—or both,” adds Jenny Zegler.
One in ten (10%) report that they are spending less on beauty and personal care in 2012 compared to 2011. While the nail category has grown by more than 70% since 2007, there has been little growth among basics such as shampoo and body care. Looking forward the beauty and personal care category is projected to grow from an estimated $55 billion in 2012 to $60 billion in 2017. “While more consumers may say that they are spending less overall, this could simply be the result of consumers swapping out professional or salon services for at-home options, ultimately to the benefit of the category. Most of the segments in the BPC category have seen sales growth, indicating that consumers are allocating their funds differently depending on the segment or swapping out professional or salon services for more affordable at-home options.” according to Shannon Romanowski, beauty and personal care analyst at Mintel.
Household care is one of only two categories which consumers say they are more likely to be spending more year on year. Indeed, cleaning provides as many as 72% of all consumers with a real sense of accomplishment. The household paper products category, which consists of products such as toilet tissue, paper towels, paper napkins, and facial tissues, is the largest segment of the overall household care market. Sales are estimated to have grown by 10% from 2007-12 to reach $16.9 billion, much of the growth is due to the strong performance of toilet tissue and paper towels. Dishwashing products experienced significant growth during the height of the recession, which has resulted in dishwashing products being the top performer in terms of growth from 2007-12. “The economic downturn has impacted this category because consumers are more value focused, resulting in changed shopping behaviors. Bright spots exists for categories which have focused on making cleaning easier through delivering innovative products that save time and streamline cleaning routines,” says Gabriela Elani, home analyst at Mintel.
With almost a fifth (17%) of all consumers believing they are spending less on clothing, footwear and accessories during the latest belt-tightening period, this slowdown in spending was not as apparent for footwear. The majority of both men and women claimed to have purchased at least one pair of shoes for themselves in the past 12 months (70% and 66% respectively), which may in part be caused by the feeling of gratification accompanying shoe shopping. Meanwhile, sales of jewelry outpaced watches growing from 2007-12 (jewelry sales grew from $56 billion in 2007 to almost $62 billion in 2012, compared to watch sales remaining relatively flat, growing from $8.8 billion to $9.4 billion during the same time period), the release of pent-up demand that started in 2010 along with an 11% outstanding growth in 2011 offset the jewelry market’s downward trajectories from 2008-09. “Though price inflation has influenced the moderate growth in the clothing, footwear, and accessories category, the intrinsic desire to self-indulge during the belt-tightening period has presented opportunities in all sectors of the category and spurred cottage markets. As mobile technology and personalized couponing become more prevalent, the importance of seamless mobile technology to the overall shopping experience increases,” adds Ika Erwina, retail and apparel analyst at Mintel.
About half (53%) of respondents changed their spending behavior from 2011-12 in the technology and communications category, with 32% decreasing spending and 21% increasing spending. Increased spending dollars may have gone in part to cellular phone service plans, with the average cell phone bill for subscribers aged 18-54 running at about $115 per month. “The past five years were revolutionary in terms of the new opportunities afforded by smartphones and tablets. Simultaneously, consumers were rapidly adopting internet subscriptions at home and third-generation (3G) and fourth-generation (4G) data services. These transitions have been enormously beneficial for a small number of brands,” says Billy Hulkower, technology analyst at Mintel.
Reflecting consumers’ continuing budget-mindedness, more than a third (36%) respondents say they are spending less on vacations in 2012 compared to 2011. However, vacation and tourism spending is estimated to have increased by more than 5% from 2011-12. This apparent discrepancy is likely the result of consumers spending time and effort researching vacation travel costs in an effort to get a better deal. What this means to the industry is that discounting on the upper and middle tiers will continue to be important to draw consumers. While more savvy travelers may be equipped to evaluate a travel service based on the value it provides and mentally attach a dollar figure to the service, many consumers will look for the discounts to feel as though they’ve “saved.” “The uncertain economy of the recession years caused many consumers to reduce discretionary spending wherever possible. As a ‘nonessential’ expense, vacations were one of the first areas to be cut. And while the economy has improved, sentiment toward traveling has picked up in tandem with increasing confidence. However, rising costs will have consumers scrutinizing their plans to extract the maximum value from their vacation spending,” says Fiona O’Donnell, lifestyles and leisure analyst at Mintel.
As a result of the recession, many consumer groups are utilizing alternatives to the car. Younger men—those aged 18-34—are the most inclined to say that they “always” or “sometimes” walk or bike in lieu of driving (58%) and to say the same about traveling by public transportation (48%). “The aging of one of the country’s largest generations, Baby Boomers, will have a lasting impact on the automotive market, especially because Millennials and Generation X are not taking to automobiles or the open road in as great a number as Boomers did. The recent economic recession only exacerbated this growing demographic rift,” says Colin Bird, automotive analyst at Mintel.
The banking industry along with many other industries will need to change their historical focus from encouraging consumers to spend on credit, to providing products that will help consumers take control of their finances. The majority of consumers (57% overall) would prefer to reach for a debit card rather than use a credit card in order to help control their spending. “Like other industries, many sectors in the financial services industry had in recent years made money from consumer borrowing and spending rather than from more conservative financial behaviors such as saving and investing. This is changing as consumers have become aware of their need to provide financial security for themselves in ways that are different from those they have traditionally relied upon,” says Susan Menke. “The banking industry along with many other industries will need to change their historical focus from encouraging consumers to spend on credit, to providing products that will help consumers take control of their finances.”
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