Overall shopper sentiment surged in 2014, but was largely flat in Q4 2014 compared with Q3 2014.
Decreasing unemployment rates, falling gas prices and an improving housing market bolstered the U.S. economy in 2014. However, wages are lagging behind, which is causing consumers to remain concerned about their economic future and cautious about their spending habits.
The outlook isn’t all gray clouds, though. The latest IRI MarketPulse survey released today found that even though shopper sentiment remained nearly flat during Q4 2014, it still maintained an overall upward trend for the year.
“It’s a mixed bag of both positive and negative forces at play in the CPG industry today,” said Susan Viamari, editor of Thought Leadership, IRI. “Though we see many positives, a huge negative is the fact that income remains quite stagnant, so many consumers still don’t earn enough money to ease budgetary strain. In fact, our latest MarketPulse survey uncovered that 22% of consumers are still having difficulty in affording needed groceries, which is unchanged from a year ago.”
IRI Shopper Sentiment Index Remains Largely Flat at Close of 2014
Constructed against a benchmark of Q1 2011, IRI’s Shopper Sentiment Index provides deep insight into how the economy is impacting consumers and changing how they approach grocery shopping. The index provides perspective in terms of price sensitivity, brand loyalty and changes in spending required to maintain desired lifestyles. With a benchmark score of 100, a Shopper Sentiment Index score of more than 100 reflects consumers who are less price driven, more loyal to favorite brands and better equipped to maintain their desired lifestyles without changes, as compared to Q1 2011.
The latest index remained relatively flat for Q4 2014 at 120 compared with 121 in Q3, but is considerably higher than the index of 102 a year ago. Consumers aged 18-34 saw sentiment improve considerably during the past year, but they are still struggling the most and indexed at 114. Meanwhile, those aged 35-54 came in at 121, which is on par with 121 for those aged 55-plus.
Consumers Remain Cautious While Optimism Is Building
When looking at the big financial picture, the Q4 2014 MarketPulse survey found that 33% feel their financial situation is worse today than a year ago, 47% feel their position is unchanged, and 20% feel their position has improved during the past year. So, where is this improvement happening?
- 36% of Millennials, those aged 18-34, feel their financial situation has improved in the past year, much higher versus the general population. This is great news, since this group has certainly struggled during much of the economic downturn.
- 33% of households earning more than $100,000 feel more positive about their personal finances compared with 15% of those who earn less than $35,000, 20% who earn between $35,000-$54,000, and 22% who earn $55,000-$99,000. Not surprisingly, the wealthy are faring better, and the lowest incomes are still struggling.
- 22% of males have a sunnier outlook about their finances compared with 19% of females
Though the economy is making positive strides, the MarketPulse survey reveals that consumers have not felt a true boost in their own financial picture, so they will continue to pinch pennies and stretch their CPG dollars in 2015 in the following ways:
- 66% of consumers will make a shopping list prior to going to the store
- 52% of consumers will choose a store because it has the lowest prices on needed items
- 47% of consumers will stock up on items because they are on sale
- 27% of consumers will buy brands other than their favorite brands because they are on sale
- 15% of consumers will not go down certain aisles to avoid unplanned purchase
”The U.S. economy made significant positive strides in 2014, but the improvements are taking longer to ripple through the population than expected,” concluded Viamari. “To activate shoppers in 2015, CPG marketers are going to have to keep playing the affordability card—giving consumers the products and tools they need to stretch their CPG dollars while still living life to the fullest.”
IRI Point of View
To dig deeper into the Q4 2014 MarketPulse survey and learn forward-looking insights about 2015 consumer trends, IRI just released a new Point of View, “2015: Promise Poking through for CPGs,” which examines how consumers will be using their common money-saving tools and making the most of new media to facilitate their CPG shopping endeavors throughout 2015. To download the free report, click here.