Rethink company strategy in the face of unprecedented disruption in consumer behavior

The Consumer Goods sector is on the eve of a very strong discontinuity in purchasing models throughout the Western world and beyond. Since 2019, there has been a contraction in the purchase of basic necessities in the USA, which continued even after the post-pandemic economic recovery, without ever reaching a "new normal" after Covid. The decline in volumes has mainly affected the food & beverage sector, with a collapse of -2.9% between 2022 and 2023 (Sources Nielsen). The upward price spiral caused by inflationary dynamics was one of the causes of the decrease in volumes; in fact, faced with price increases that have grown by +34% for the FMCG world (43% faster than wages in the USA), the consumer has become much more cautious.What is happening in the United States is not an isolated case and the American market is not the only market that is facingunusual, erratic and difficult to predictof the application; Europe is also facing a radical change in consumption patterns. The clearest evidence is the polarization of purchasing behaviour: on the one hand, there is an increase in consumers who prefer premium products - provided that these substantially and effectively satisfy some specific needs, such as a greater nutritional intake of fiber or protein for example - and on the other, a group of consumers who are more sensitive to price. Analyzing this last category, it is noted that there is no stringent loyalty to brands as in the past and, often, even the sustainability attribute of the product is considered a non-priority driver compared to economic convenience. In fact, a characteristic of the Italian and European middle class in the post-pandemic era is the predilection for "experiential" activities (such as trips and dinners) which therefore lead to savings in everyday expenses, also conveying the choices made on the supermarket shelves. A clear result of this phenomenon is the generalized growth of private labels to the detriment of manufacturer-branded products, again, especially in the absence of substantial and substantiated benefits.The situation changes as we move towards the Eastern markets; in fact, according to a McKinsey study, young Chinese, Indian and Saudi consumers aged between 18 and 24 are inclined to purchase premium products and willing to pay a higher price than their peers from advanced economies. They are more optimistic about the economic conditions of their home countries and this phenomenon is expected to result in higher levels of consumption. It is very important not to underestimate thispatterns,which represents an opportunity for Italian companies in those territories, considering that by 2030, 75% of consumers in emerging economies will be aged between 18 and 34.The scenario, therefore, appears difficult to read. The linear extrapolation of past trends can no longer work: in mature economies, the segmentation models used until now by companies to define target consumer groups can change radically, cutting out important segments of customers. The approach to be adopted is aimed at micro-segmentation to respond to the specific needs of certain groups of consumers and establish themselves in selected market niches. In these situations there is less price elasticity and the offer can be revised with a view to scale-up and emphasizing the value proposition.To avoid the occurrence of major shocks at a sectoral level - such as those that have impacted the automotive or fashion sectors - it is necessary to re-focus strategic planning. Activities such as launching new products and entering new markets must be re-examined with a lens that takes into account the discontinuities mentioned above.The opportunities that arise from the specific needs of consumers in local markets and from an inclination towards premiumness in emerging markets must be investigated and the "compass" to orient oneself in a growing complexity must be that of increasing the value of equity in the long term through the strengthening of technological and product competitive advantages.Elisa Montanari is Director of EDIGrace To is Junior consultant at EDI.