Circana unveils 2024 FMCG insights: Navigating value, funflation and AI in Australia’s retail landscape
Circana, a leading advisor on the complexity of consumer behaviour, have released its first Fast-Moving Consumer Goods (FMCG) outlook report for the Australian market in 2024 with several notable key findings. Many trends from 2023 have carried on into the first quarter of 2024 year in response to households’ continuing challenges to manage expenses amidst the ongoing cost of living crunch.
Circana’s Head of Media, Insights and Analytics for Asia Pacific, Alistair Leathwood summarised the characteristics of the quarter by emphasising that while the retail sector is focused on supporting consumers and innovating to find efficiencies and more engaging ways through technology of immersing shoppers in the experience and entertainment value of shopping, the cost of doing business is still higher due to macro factors and these expenses are being reflected in pricing.
Leathwood said, “In an economic climate trending towards disinflation, the idea of value is changing as people search for everyday experiences and little luxuries as a form of escapism. Funflation continues to be a strong consumer trend as big-ticket expenses continue to be out of reach for most Australians.
“Shoppers are more actively seeking out value and modifying their behaviour to incorporate little luxuries into their shopping journey.”
The meaning of value is evolving
While inflation is easing off, shoppers are still experiencing pain and frustration at the checkout for everyday groceries. Despite disinflation, Australians are still paying higher prices than three years ago, during the height of the pandemic. A product that Australians are purchasing on a half-price promotion right now represents a price that is still 60 per cent higher than it was just a few years ago.
Don Unser, President of Thought Leadership, Circana, added, “Consumers have developed a different way of thinking about their purchases as their spending power has deteriorated.”
Leathwood said, “The value of value is still present, however, in the face of disinflation and continual economic turbulence since we exited from pandemic disruptions, inflation has come down substantially since its peak in December 2022, and in the long term, we see a convergence in both the inflation rates of grocery products in the total Consumer Price Index (CPI). Disinflation is leading our expectation of slowing sales growth in 2024.”
90 percent of Australians across all ages are worried about the continued high prices of food and groceries. Sustained sticker shock will remain for the foreseeable future, which in turn impacts consumer behaviour. 45 percent of Australian shoppers are willing to compromise on their favourite brands in order to save money; 40 percent are being more cautious against trying new products and 73 percent are more considered in their spending, with this group of respondents always comparing brand prices before buying.
Leathwood added, “With this in mind, the meaning of value is starting to evolve, as Australian shoppers experience inflation fatigue and begin to search for something to lift them out of the ordinary. At the grocery store, shopping trends indicate that Australians are looking elsewhere than just ‘everyday low prices’ and are instead seeking out promotions to add value to their trolleys. When the quality of a product is consistently good, then Australians are looking for more than just a low price, and the current trend indicates that shoppers now value promotions and special offers rather than price consistency.
“The clear focus for manufacturers and retailers is to increase the sense of fun, entertainment and engagement for shoppers as part of the value proposition while also maintaining pinpoint accuracy on pricing. Brandverse is key. Creating an ecosystem of immersion for shoppers where they feel enveloped in a brand’s benefits and attributes is essential for retention and engagement.”
Igniting innovation through AI
From the business marketing perspective, beginning in 2023 and continuing into this year and beyond, Artificial Intelligence (AI) is now igniting opportunities for small and big brands to innovate. Smaller businesses can now use AI tools like Shopify Magic to help online retailers to produce product descriptions in seconds. As more and more business grow in confidence in using AI to their advantage, it will become an increasingly prevalent tool for content marketing in 2024.
Leathwood added, “Circana believes that as the use of AI evolves, the future will see AI automating more marketing, sales and supply chain decisions. We have just scratched the surface of what’s possible with AI and as we get better at optimising its usage, businesses will be able to rely more on AI to drive their innovation.
“We see AI as a significant area of opportunity for the retail sector however the biggest hurdle for adoption is a lack of understanding and confidence in the technology and available tools. Circana is assisting many retail businesses to harness AI and explore its potent ability to transform mundane marketing into transformative campaigns that capture the attention of consumers and increase share of wallet.”Beyond this sphere, AI is also an inherent element of Circana’s sphere of solutions and offerings including Liquid Data Engage. With Liquid Data Engage, Circana addresses the unique challenges faced by retailers, simplifying the complexity of managing market performance, category management, loyalty, supply chain, and retail media data assets in one simple-to-use solution. By seamlessly integrating these data assets, Circana’s technology-powered analytics can quickly identify opportunities that pave the way for growth.”
Funflation and lifehacking to add little luxuries to the everyday experience
Leathwood said, “The extent of the pandemic hangover cannot be underestimated as is clearly shown by the strength of the funflation trend. With big spend items like overseas travel still off the books for many Australians, these consumers are showing a willingness to spend to seek joyful distractions on things like Taylor Swift concert tickets.
“Social media continues to drive a #lifehacking trend that teaches viewers how to turn mundane everyday items into something more luxurious, thus elevating its value or worth in terms of the everyday experience. This trend, fueled by Millennials and Gen Z content creators, is a response to the cost-of-living battle making the everyday lived experience painful to pay for by optimising it.
“This is a trend that will continue to grow as more shopfluencers and brandassadors flood the social media market space with tips, insights and hacks on how to incorporate products and brands into our lives on a budget. Their sole focus is to increase shoppers’ spend on their aligned products and services using the power of profile, lifestyle, money-saving tips and entertainment in a manner that achieves virality across online and offline environments. As I said, expect more of this.
“This is also a highly evolving area where Circana is assisting many businesses to develop strategies and tactics for lifehacking viral takeoff.”
Trends from 2023 carry over to 2024
Leathwood, continued, “Some of the consumer and business trends from 2023 have carried over to this year, with a slightly different meaning. In 2023, the top driver for consumer spending was value. In 2024, while value is still a top priority, Australian shoppers are not just looking for the lowest cost but for more. They’re looking for promotions to drive the consumerism because the overall quality of products is already at a high level and gives shoppers confidence that the baseline for any given product is high. Funflation spending is another trend that has carried through to 2024 as Australian consumers continue to feel the economic pinch in our post pandemic world. Little luxuries and everyday experience help lift the mood and make the mundane more meaningful because huge expenditure for leisure is no longer a viable option. Finally, the emerging trend from last year in AI marketing has seen a huge uptick and will continue in that trajectory for the rest of the year and beyond.
“The biggest challenge for the sector is to embrace and optimise the use of AI and Circana is certainly assisting many businesses to do just that.”
