03/11/2022

Consumers turn to “selective uptrading” amidst rising inflation

Early findings from IWSR’s Consumer Price Sensitivity Barometer

Later this month, IWSR will be releasing a major multi-wave 17-market study that will track consumer attitudes and sensitivity to price fluctuations across beverage alcohol.

Early indications from the data suggest that consumer sentiment varies widely by country. Some markets, such as India and China, remain buoyant, with a strong desire to uptrade. Other markets, particularly in Europe, look to be in full recession mode, with worried consumers looking to save money wherever they can. In between these sit a large number of markets, including the US, where the picture is quite complex.

Within this nuanced landscape, there are a few commonalities in consumer behaviour and attitudes across markets.

Consumption and shopping habits

Around half of all adult drinkers of beverage alcohol across the 17 markets surveyed agree with the statement “I am more interested in moderating my alcohol consumption generally”, with only around 1 in 5 saying they disagree. Younger consumers of legal drinking age are much more likely to be moderating than older consumers. There is also widespread evidence of more careful shopping behaviours – switching retailers to get better prices, and waiting for favourite brands to be on promotion before buying. Higher income consumers seem to be more insulated from economic headwinds.

Selective uptrading

While some markets are much more positive than others, certain alcohol categories seem to be doing consistently better than others in terms of hanging on to the premiumisation trend. For instance, drinkers of brown spirits such as whisky and Cognac, plus fashionable categories such as tequila and Champagne, are much more likely to say they are spending more on those categories than drinkers of beer, RTDs and wine.

In some cases this increase in recalled spend will be enforced rather than voluntary, as their favourite brand puts its prices up. However it also suggests that consumers are engaging in what IWSR term “selective uptrade” of premium beverages. In response to constrained incomes, consumers are more selective about which brands and categories they spend their disposable income on, while trying to save money on more quotidian beverage categories. It also aligns with a desire to moderate consumption generally.

Market contrasts

How “selective” the uptrading turns out to be varies considerably by market, and seems to correlate broadly with economic health and disposable income. It is also important to note that, in an inflationary environment, those saying they are spending the same or less per unit in a product category are in effect downtrading.

The most positive markets, such as China, India and Brazil, are showing increases across all or almost all categories. Initial analysis also shows that, even in the most pessimistic markets, selective uptrading is still taking place, just in more isolated pockets. For instance, in two of the most downbeat markets – Germany and the UK – 30% of the drinks categories measured are still showing net increases in recalled spend.

The initial conclusion is that the premiumisation trend in beverage alcohol has not been extinguished by economic headwinds – at least not yet. However it is also clear that the strains on household finances are becoming apparent to many consumers, either because of transnational factors such as energy costs, or local economic factors.

The IWSR Consumer Price Sensitivity Barometer, which will be published over two waves (November 2022 and Q2 2023), tracks shifts in consumer sensitivity to price changes by alcohol beverage category, going out to on-premise locations, demand changes by category, and attitudes towards trading up/down across categories.

To access the full Study, please get in touch with your IWSR Account Manager or email enquiries@theiwsr.com

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