Rabobank Group

29-8-2008 | Other news

A new Rabobank ‘Food Retail’ report finds consumer preferences for healthy, gourmet or convenient foods are being driven to extremes. However, increased food prices could increase consumers’ price sensitivity.

“In spite of the economic decline, many consumers continue to be driven by factors beyond price, which has created a ‘barbelling’ trend,” said Rabobank Analyst Stephen Rannekleiv. “This means consumers are gravitating toward one extreme or the other – whether it’s a healthy lifestyle, convenience, price or something else.”

Rannekleiv says that food retailers must look beyond traditional differentiation strategies to succeed in today’s economy. Therefore, the report examines three key elements for effective positioning: customer and competition knowledge; ability to communicate a value message; and cost controls.

Customer and competition knowledge
Consumers continue to maintain various priorities like health, gourmet, convenience, or price when it comes to purchasing food. But, some consumers are now focusing on one of these priorities to an extreme, almost abandoning the others completely. 
Successful retailers are combining healthy lifestyle offerings with other differentiators such as price, gourmet offerings and convenience.  

Communicating a value message
“In the current economic context, value is increasingly important to consumers, but it is ill-defined and subjective,” said Rannekleiv. “Reducing prices and offering specials only serves to compromise margins unless consumers perceive the value clearly enough to drive increased traffic.”

Retailers must balance their response to current consumer priorities without jeopardising the long-term value of their brands’ identity. To do this, retailers should focus resources on those that respond to consumer demand, rather than repositioning the image of a brand to respond to cyclical conditions.

Cost Controls
“While smaller retailers have faced cost disadvantages for some time relative to their larger competitors, the ongoing challenges in the economy can be expected to create greater price competition,” said Rannekleiv. “This will further squeeze margins and create an increasingly challenging environment for smaller chains, and will likely lead to further consolidation.”