Three in five global consumers in worsened financial situations say that they are likely to make a one-time impulse purchase “when the food or beverage product is innovative in flavors or tastes”
With inflation and cost of living pressures on consumers, you could be forgiven for thinking that indulgence as a macro trend has bitten the dust. Well, no, actually. But it is evolving, in ways compounded by the pandemic. This has implications for retail go-to-market, particularly in typical ‘treat’ categories such as chocolate, cookies, snacks, alcohol, cake, and desserts.
There are a number of types of indulgence, ranging from ‘classic’ and experiential to affordable and healthy. Healthy or ‘permissible’ indulgence was growing the fastest even pre-pandemic, and has further accelerated since, with 79% of consumers feeling good about themselves after consuming a healthy indulgence. This includes categories such as muesli bars, and any product that has desirable, premium, and unusual flavors and ingredients without high levels of ‘nasties’ such as sugar and fats, or with positive health benefits. Barry Callebaut takes it a step further, with ‘mindful’ indulgence combining the need for more healthful indulgences with what’s good for others and the planet.
Given inflation and the rising cost of living, affordable or ‘frugal’ indulgence has also been on the rise. This is evidencing itself in shopper behaviors such as:
- Trading down: shoppers may opt for more affordable alternatives within indulgence categories, such as choosing a mid-range bottle of wine instead of a high-end vintage.
- Selective indulgence: Consumers might prioritize indulging in specific categories or occasions while cutting back on others. For example, they may splurge on gourmet chocolate but economize on luxury skincare products.
- Limiting or downsizing portion or pack sizes, or frequency of purchase.
What do these changes in indulgence mean for go-to-market?
Innovation & Marketing
Three in five global consumers in worsened financial situations say that they are likely to make a one-time impulse purchase “when the food or beverage product is innovative in flavors or tastes”. Companies can emphasize mood lifting and intriguing sensations with interesting collaborations and limited editions and ‘better for you’ variants to inject new life to old favorites through a sense of surprise and discovery. This in turn can change perceptions and re-position brands.
Sensoriality, exclusivity, seasonality, origin storytelling, and craftsmanship all play an increasing role, particularly in categories such as chocolate and wine.
CPG companies can leverage social media platforms and e-commerce channels to showcase indulgent products, reach wider audiences, and personalize offers. These platforms provide opportunities for targeted advertising, influencer partnerships, and direct-to-consumer sales, resulting in enhanced revenue generation.
To adapt to changing shopper behaviors around indulgence, CPG companies should consider the following:
- Pricing strategies: re-evaluation of pricing structures to align with consumers’ changing affordability thresholds. This may involve introducing value packs; smaller pack sizes, potentially at the same price e.g., ‘shrinkflation’; or more affordable product lines without compromising on perceived quality.
- Innovation and product development: developing indulgent products that offer value for money. This could include introducing affordable luxury options or repositioning existing products to meet changing demands.
- Consumer communication and marketing: Emphasize the value and affordability of indulgent offerings, showcasing how they align with consumers’ evolving needs. Engaging marketing campaigns that highlight experiential and selective indulgence can help capture consumers’ attention and drive sales.
As the cost-of-living crisis causes consumers to feel the pinch, we are seeing people still splash on indulgence, but focusing on value for money. Trade promotions for indulgence products should be geared toward enhancing the shopping experience, driving impulse buys. They can be optimized through offering limited-time promotions on premium products, introducing loyalty programs that reward indulgent purchases, and implementing cross-promotions to create an indulgence ‘halo effect’.
Trade promotion considerations also include:
- Strategies: Trade promotions should align with changing consumer preferences for indulgence. This may involve offering discounts on mid-range indulgent products or bundling complementary items to enhance value perception.
- Channel selection: As consumers become more price-conscious, discount retailers and online platforms may witness increased demand. CPG companies should consider adjusting or expanding their distribution channels to meet shoppers’ evolving needs and ensure their indulgent products are accessible across various channels.
- Timing: Timing is crucial. Companies should monitor consumer behavior closely to identify peak demand periods for indulgent purchases and time their promotions accordingly. This could involve offering discounts during periods when consumers are more likely to splurge, such as special occasions or holiday seasons.
Affordable and healthy indulgence doesn’t mean removing indulgence cues at the point of purchase. In fact, in the current environment the opposite may be required to increase the likelihood of a sale or impulse buy.
This means that brands and retailers should curate visually appealing displays, strategic product placements, and enticing in-store promotions to create an ambience of indulgence. This may entail investment in in-store design, layout, and visual merchandising to evoke feelings of luxury, exclusivity, and indulgence.
It could also include creating dedicated sections for premium and indulgent products, integrating sensory elements like fragrance and music, and offering product sampling stations and interactive displays. Personalized recommendations, captivating storytelling, tailored offers, and interactive digital signage all enhance the feeling of indulgence and customization.
To succeed in this evolving indulgence landscape, companies must prioritize product innovation, engaging marketing strategies, and creating indulgent shopping experiences to capture the hearts and wallets of indulgence-seeking consumers. As consumers adapt their preferences and spending patterns, revenue generation management, trade promotion optimization, and retail execution strategies must align with these evolving trends. By understanding the shifting face of indulgence in inflationary times, CPG companies and retailers can proactively adapt their offerings, pricing strategies, promotional tactics, and retail experiences to stay relevant, meet consumer needs, and maintain growth in a challenging economic climate.
Exceedra by TELUS Consumer Goods can help you optimize revenue generation, trade promotions and retail execution. For more information or to request a demo, click here.