Industry implications of evolving consumer behaviour — Deep dive 2: Trading down

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This report is part 2 of 3 "Deep Dives," which are connected to a main report entitled Industry Implications of Evolving Consumer Behaviour (PDF) partially funded by Agriculture and Agri-Food Canada.

This "Deep Dive (PDF)" explores consumer behaviours in response to inflation on food prices in Canada, from 2021 to 2023. It considers consumers' sensitivity to food prices, and the factors that may cause habits to restrain food expenses over the medium term.

Consumers' behaviours to contain overall food costs, ranging from brand and store-switching to changing the types of foods purchased, are referred to as "trading down." Canadians are increasingly making trade-offs between attributes like convenience, quality, and even nutrition to keep prices low.

The "Deep Dive" was developed through the AgriCommunication Initiative to increase the sector's understanding of changes in consumer demand. This supports ongoing dialogue among governments and industry on how to best position the sector to respond to these trends.

Consumers concerned with food affordability are "trading down"

Food affordability is generally defined as higher food prices relative to incomes, rather than rising prices. High food price inflation in Canada over the past 2 years is increasing consumers' preoccupation with food affordability:

Two-thirds of Canadians reported being very concerned about rising food prices^{note 1}
Nearly 3 in 4 Canadians reported that rising prices were affecting their ability to meet day-to-day expenses^{note 1}

Trading down strategies

Channel-switching

Consumers are making a set of trades to purchase food (for example, substituting prepared meals from the grocery store for restaurant dining):

Roughly 4 in 10 Canadians said they were eating outside of their home less often in response to higher food prices^{note 2}^{note 3}
77% said that they are opting for more affordable dining establishments^{note 4}
76% showed a preference for dining establishments that offer discounts, rebates, and loyalty programs^{note 4}

Store-switching

Consumers are increasing their visits to "discount stores" that have a reputation for lower prices, rather than traditional or higher-end grocery retail chains:

Almost 60% reported having visited "discount stores" more frequently in the past 12 months^{note 5}
47% reported having increased their visits to dollar stores (that is, variety stores) over the past year^{note 5}

Buying less food and reducing waste

Consumers are making these choices to save on costs:

Over one-third indicated they had reduced their amount of food purchased in response to higher food prices^{note 2}^{note 3}
Almost 80% asserted that they had significantly reduced food waste in the past year^{note 5}

Brand-switching

Consumers are purchasing more affordable brands:

Almost two-thirds reported they were more inclined to opt for generic brands over national brands as a cost-saving measure, when compared to the previous year^{note 5}

Shopping on deals

Consumers are seeking in-store promotions and sales, including discounts on products that are near expiry:

Three-quarters used coupons to a greater extent over the past year^{note 5}, amid other deal-finding strategies such as apps, and flyers

Altering their diet

Consumers are examining their consumption of typically higher-priced or perishable items (for example, meat, fresh fruit, and vegetables):

Nearly 50% said they had reduced the quantity of meat or protein sources (for example, eggs, dairy products, plant-based products) they purchase due to increased food costs^{note 5}
25% indicated that they had purchased more frozen food^{note 3}, potentially in response to a relatively lower price, or as a desire for food that has a longer shelf life

Implications for industry

Consumers are expected to continue making food choices that reflect price sensitivity in the coming years, even if rates on food inflation slow down
Shifts to larger formats and multi-packs that offer lower per-unit costs appear to be gaining popularity in categories such as snack foods
Economically sustainable strategies in a price-sensitive environment will involve cutting expenses throughout the supply chain
Efforts to improve transparency in pricing may help drive loyalty, as will providing consumers with the information and education that they need to eat well while keeping costs low

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