Feeling constrained

Despite vaccine rollouts and the accompanying promise of a return to normality, NielsenIQ research suggests there are still challenging days ahead. In a new global study, conducted in 16 countries, the research firm found the number of consumers identified as “newly constrained” jumped from 23% to 46% in the last four months of 2020, and warned there’s a risk this group could continue to grow as economic stimulus packages and furlough schemes end in some countries.

“Brands and retailers are again in uncharted territory this year,” says NielsenIQ in its report. “The consumer of today is not the one they knew last year.” Newly constrained consumers are defined by NielsenIQ as those who have experienced a decline in their household income or financial situation, causing them to “consciously” watch what they’re spending.

Along with the newly constrained consumers, a group dubbed the “cautious insulated” is also expected to drive spending shifts this year. These new consumer segments are additions to the two NielsenIQ identified in 2020 simply as the “constrained “and “insulated”—each group characterized by how they were impacted, relative to their spending, by the crisis. The four cohorts’ new habits, NielsenIQ says, are “expected to be very different compared to what was experienced in 2020.”

While Canada is faring better than some countries measured in the study, 32% of Canadian households are now considered newly constrained. “That’s not good news,” said Francis Parisien, NielsenIQ’s vice-president Eastern-Canada during the firm’s State of the Canadian FMCG (Fast-Moving Consumer Goods) Industry webinar in late February. “Newly constrained households will lower their discretionary spend to afford stripped-down basics.”

Parisien added that this consumer group will cocoon at home, limit travel and scrutinize all transactions. “This might be concerning for our industry right now as we are expecting that group to continue growing over the next few months. There’s a reason why we see value retailers growing faster than the national average right now.” Parisien added that while still small in terms of grocery market share, general merchandisers—like Giant Tiger, which has been expanding its network of stores—are catching Canadians’ attention and wallets. In fact, the channel has the second-fastest growth in Canada right now, experiencing 18% growth in the 52 weeks ending Dec. 20, 2020, trailing only the online retail channel.

What to do? While the study concludes there is no one-size-fits-all approach to winning over these new consumer groups, it highlights some common ground: 85% of global consumers want a better variety of quality value offers, and 71% are still willing to pay more for higher quality. “Brands and retailers need to understand who their consumers are today,” says NielsenIQ, “and find ways to meet their new needs to find growth in a challenging economic environment.”

This article appeared in Canadian Grocer‘s March/April 2021 issue.