While there is a strong labor market shoppers are looking to spend wisely, even though U.S. consumer confidence is high. These are some finding by McKinsey & Company.
The company found in its annual US Sentiment Survey of over 22,000 people that unemployment is at a historical low, wages are rising at their fastest rate since the onset of the recession, and consumption continues to grow at a steady pace.
To gain a clearer idea of how consumers in the region are thinking, September 2019 data from the survey, covering more than 4,500 consumers, was analyzed by McKinsey.
“U.S. results show that feelings of financial pressure are at their lowest levels since the recession, and few consumers cut back on spending,” the survey noted.
“Only 39 percent of consumers feel financial pressure today, compared with 77 percent in 2009; just 27 percent are cutting back on spending today, versus 63 percent during the recession.”
Additionally, even though consumers have no plans to cut back on spending, they are still price-sensitive and use multiple strategies—such as using coupons and shopping around to save money.
While thrifty, consumers are more often willing to trade up to more expensive, often premium, products: 11 percent of respondents today are willing to trade up, as opposed to just 7 percent in 2016.
In food, consumers are inclined to trade up in the fresh and ready-made-meal categories, such as dairy-free milk, fresh produce, and chilled meals.
In good news for premium brands, these consumers are happy with their choice, as 81 percent of respondents prefer the higher-priced product and believe it to be worth the extra money.
Millennials are particularly prone to trade up when considering all types of consumers. Strikingly, they are 2.5 times more likely than baby boomers to do so.
Good news for the produce industry is that another continuing trend is consumers’ increasing preference for healthier products. This trend is especially strong among top-tier consumers, with 20 pecent of them reporting buying more natural or organic products in the past 12 months, and 15 percent report buying more locally sourced products in that time period.
The survey also found that there is strong distrust of big-brand names where 70 percent of respondents believe large food companies put their own financial interests ahead of consumers’ interests, while only 46 percent believe this to be true of smaller food companies.
Also, consumers are taking an interest in the environmental impact of product packaging. Millennials tend to give this more this consideration as 71 percent take sustainable packaging attributes into account in their purchasing decisions, as opposed to just 57 pecent of baby boomers.