Rising raw material costs continue to impact the SymphonyIRI shopper basket prepared exclusively for just-food.

The increased cost of an average shopping basket is clearly highlighted in this quarter’s barometer in every country we measure across Europe as well as the US. The only exception is Greece, where an average weekly shopping basket is still the most expensive but the cost is falling.

Impacted the most severely by the Eurozone crisis, there appears to be a limit to how much shoppers can tolerate in Greece.

Brands and retailers alike are responding to that pressure by keeping prices low, no doubt impacting profit margins in the process despite the squeeze on volumes that they are facing. National brands had further to fall and reduced their prices more sharply than the private-label competition.

Greece wasn’t the only country to respond to consumer pressure. Most other countries in our barometer made only marginal price increases. Generally lower than the rate of inflation and rate of raw material price increases, they are a reflection of the severity of the price pressure facing brands. The biggest price increases were seen in France, the UK and the US.  

Even as prices rose, volumes in our average basket have not overall fallen away. Dining at home – always cheaper – is back in vogue and while families are clearly searching for value, our barometer shows food is still an essential item that is less vulnerable to cut-backs. Indeed, in many countries it’s clear that a little bit of something nice is what is taking the edge off cutbacks in other areas, including non-food items in the weekly grocery basket.

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Quality no longer comes at a price for food purchases, which is good news for shoppers. In addition to the brands that shoppers have always identified with, private-label brands have worked harder over the last few years to make their products competitive with the quality of national brands. They still represent good value for shoppers, but there are new quality/luxury options for shoppers. Mid-range and premium additions to private-label ranges provide shoppers with more choice while helping them to keep the price increases of their weekly shop within their limits.

Private-label products are no longer a low-cost alternative to brands. The increase in the cost of a basket filled with just private-label products makes them much closer to one filled with just national brands. This closing of the price gap is most evident in The Netherlands, UK, Italy, France and Greece. It illustrates clearly the pressure that retailers’ private label strategies exercise on prices for all FMCG brands. In many respects the growth of private-label products is anchoring price growth increases for national brands. It is also reflective of the general demand by shoppers for value – and perhaps their capacity as ‘pro-sumers’ as they become more willing to strip a product back to its bare essentials during these turbulent times.

In some countries – Germany, Spain and the Netherlands for example – we see this drive to the essentials most strongly. Here we see the lowest levels of private-label pricing and a larger share of volume sales for retailers. It should be no surprise that retailers in these markets really get behind their own-label ranges and push it as a core part of their strategy as they try to cope with shopper pressure on prices. Entering our sixth year of economic turbulence this is perhaps not surprising.

However, even with fierce pricing pressure and hyper-competition in most categories and resurgent private-label developments from retailers, national brands still demonstrate their consumer understanding and communication skills to maintain premium prices and strong market positions. Value manifests itself differently for different consumer segments.

We are seeing an unprecedented situation playing out with sustained economic uncertainty and turbulence in very well developed markets with major players at each level of the value chain. Yet even with the value squeeze and closing gap between national and retailer brands, quality and value are prevailing.

The importance of food and meals in not just maintaining the body but also the spirit is perhaps there to be seen. Whilst shoppers are doing what they can to keep their weekly shopping within budget, they still want to see quality and meaning in the items that they put in their basket.