Consumers tolerate food price hikes of up to 40%, finds cost resistance survey
09 Dec 2021 --- Consumers will stop buying a product when its original price has risen by an average of 40%, reveals a survey conducted by SurveyGoo. At this point they go in search of cheaper brands.
The survey commissioned by Ingredient Communications identifies this percentage from 1,063 UK and US consumers interviewed online this month as the point at which shoppers will consider a product too expensive.
“In such challenging market conditions, brands will need to work hard to retain consumer loyalty,” says Richard Clarke, managing director of Ingredient Communications.
“An effective way to achieve this is to demonstrate added value by using high-quality ingredients that provide clear differentiation and command high levels of trust, whether that’s through proven efficacy, sustainability, strong co-branding or a combination of these.”
Communicated effectively, these values will tie a consumer to a brand more closely, mitigating the impact of price increases on purchasing behavior.
About 94% of respondents noticed their food bills had gone up in the last three months. In addition, 79% believe supply chain problems such as “driver shortages” are responsible for these price increases.
Consumers are happy to shop around in order to offset the impact of upward price pressures.
Limit to buying pricey products
Respondents were asked to select the point where they would stop buying a selection of food, beverage and nutrition products due to price increases. Their responses were measured using a scale of +5% based on the question “I would buy this product whatever the price”.
The results indicate that shoppers are more immune to price increases for low-cost staple goods. Consumers are least price sensitive to milk, which could increase in price by an average of 65% before respondents would stop buying it. This was followed by bread (62%) and fresh vegetables (60%).
There is greater resistance to cost increases in nutrition categories, where the base price of products tends to be higher. Respondents will stop buying protein powder once the price increases by an average of 17%.
The corresponding plateau was 23% for probiotics, 26% for dietary supplements and 28% for omega 3 fish oil supplements.
Last month, the FAO Food Price Index surged to its highest level in a decade. The index highlights the soaring cost of cereals and vegetable oils around the world and noted that global food prices increased 30% in the last year.
Content shopping for cheaper brands
Consumers are happy to shop around in order to offset the impact of upward price pressures, the survey finds. Nearly half of respondents (48%) switched to a cheaper brand in the last three months as a result of price rises.
A further 26% changed to a retailer’s own-label version of the same product.
“For basic goods, even a large percentage price increase might still only be a matter of cents or pennies. By contrast, a small percentage increase in the cost of a premium nutrition product might be measured in dollars or pounds,” says Clarke.
Edited by Inga de Jong
