Saturday 25 June 2022

Households buy less, pay more and eliminate products due to high inflation

Companies, along with their brands, take measures not to be displaced from the shopping list

Paying the bills

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25 June 2022 - At The Banks - BCCR

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QCOSTARICA – n times of high inflation, consumers prioritize basic products or substitute items for cheaper brands. According to the consulting firm Kantar, Costa Ricans reflect this behavior and during April, compared to the same month in 2021, they showed a purchasing behavior directed towards the basic basket and a reduction in the demand for some dairy products and personal care products.

In times of high inflation, consumers prioritize basic products, but they can also change brands, for cheaper products or in smaller presentations. Photography for illustrative purposes.

This consumption trend increases in uncertain times where Costa Rica’s inflation, in April, was the highest in the last 13 years: 7.15%, according to the interannual variation of the Índice de Precios al Consumidor (IPC) – Consumer Price Index.

The analysis of Purchase behavior of the mass consumption basket prepared by Kantar reflected that the purchase volume, in April 2022, decreased by 1% year-on-year, but experienced a 4% increase in price. The category of fragrances and colognes suffered the most from the loss of appetite in purchases, but food products are also in the top spots.

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Three lines of milk, for example, are among the five products with the least demand in April: evaporated in second place, condensed in fourth, and liquid in fifth place.

Kantar is a global consumer data, key and consulting company, with a presence in 90 markets worldwide. In Costa Rica, they work with a panel of consumers from 750 households, which they follow up every two weeks, to collect information on the consumption basket of more than 70 categories, including food, beverages, dairy products, personal care products, and home care. home, as explained by the firm on its website.

This orientation towards basic necessities is also observed in the Activation of the Costa Rican Consumer 2021 study by CAC Porter Novelli, which found that 92% of Costa Ricans buy only the basics. One of the reasons for this is the uncertainty due to the pandemic.

Another reason for conservative purchases is the constant variation in the exchange rate of the colon against the U.S.dollar, which has risen 20% since the start of the pandemic, based on the weighted average in the Foreign Currency Market (Monex), since the March 1, 2020 (¢571.31 per dollar) through May 31, 2022 (¢688.51).

Less dairy

Dairy products dominate the list of categories in which consumers reduced the percentage of purchases the most. They are only outperformed by one non-food item: fragrances and colognes.

Although the line of milks less purchased in purchases corresponds to usual ingredients in the pastry shop, the liquid milk that is part of the Costa Rican basic basket also stands out.

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At Dos Pinos cooperative, they recognize that the current context that the country and the world are going through causes the consumer to vary their consumption habits oriented towards options that fit their possibilities.

“That is why at Dos Pinos we work on a constant process of innovation that allowed us to bring the Productores de Bienestar (Producers of Well-being) line to grocery stores, mini-supermarkets and bakeries, an alternative in convenient presentations and made with 100% cow’s milk, so that families have access to nutritious products and at a differentiated price,” indicated the cooperative.

The third product, in order of least demand in April, that completes the list is instant coffee. The Nestlé company produces three of the five products that registered fewer purchases in April: evaporated milk (second place), instant coffee (third place) and condensed milk (fourth place).

Nestlé’s experience in the market led to the creation of a commercial strategy focused on providing greater benefits to those who choose them and thus not being displaced.

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According to data from CAC Porter Novelli, 97% of Ticos (Costa Ricans) look for cheaper brands when they make purchases.

Strategy to survive

Offering the public a benefit for the purchase is one of the tools that companies resort to, either with royalties or offering the same product but at a smaller size, which causes a lower price.

“In the instant coffee category, our actions are focused on combos or packs, product royalties, promotions and samples at the point of sale; with very good results. In the case of La Lechera, a leading brand in the condensed milk category in Costa Rica, we launched a ‘2Pack’ promotion that allowed consumers to obtain a special price per unit during the seasons of greatest demand: Christmas and Easter,”said Sandra Jiménez, general manager of Nestlé Costa Rica.

These strategies are implemented to retain buyers and, in a certain way, implicitly tell them that the company cares about the current situation that they going through and for that reason they offer alternatives so that they do not have to restrict their tastes.

“Brands have to be strictly economic, appeal to consumer loyalty and understand consumer habits so that products are not displaced. In this duality, brands must understand that the consumer is more at home, which means that advertising must also vary and appeal to another type of communication; they must be present with utility and functionality”, recommended Óscar Solano, creative and digital vice president of CAC Porter Novelli.

These recommendations were put into practice by the chain of beauty products for hair Super Salón. They recognize that their inventory is not essential in the basic basket, and for this reason they took measures to avoid the loss of customers.

“We have noticed that instead of buying a large 500-milliliter format, people buy small sizes and even sachet presentations (sealed, disposable containers, for one-time consumption) and that is why we have tried to increase the variety and options. of small sizes so that they spend less money on each visit they make to the store,” said Gerardo Moreno, manager of imports at Super Salón.

The category of “hair treatments”, for example, was the least demanded in mass consumption purchases in March 2022, compared to the same period in 2021. In the year-on-year variation of April this year, it does not appear on the list, but yes shampoo occupies the seventh place.

Mass consumption basket
Inflation

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"Rico" is the crazy mind behind the Q media websites, a series of online magazines where everything is Q! In these times of new normal, stay at home. Stay safe. Stay healthy.

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