Inflation has made a break in the purchase of the Spanish for months. You pay twice as much as a year ago for certain oils, 30% more for pasta; meat and fish exceed 10%... The consumer has responded with certain changes in habits typical of a crisis, without being one, and the situation threatens to get worse. The data shows a certain slowdown and the return of summer seems difficult due to the loss of confidence in the face of the threat of recession. According to estimates, marked by uncertainty, the client could enter a total crisis mode after the summer, with an impact on general consumption.
One of the reactions is going through more times to buy, but with lower expenses. "The increase in frequency is done to control spending, with a decrease in the average ticket that is varying according to the chain," explains Ignacio García Magarzo, general director of the Asedas association (among its members Mercadona, Dia, Lidl, Condis or Coviran). “Fewer things that are unnecessary or that may be thrown away are bought.” These are exceptional times: the food chain has had stable prices since 2002, he recalls (see graph). But now everything has exploded and habits are disrupted.
“Spacing purchases is a behavior that occurs not so much when there is inflation, but when there is a crisis. It is done when you are afraid or have difficulty making ends meet so that it visually costs less,” says César Valencoso, consulting director of Kantar World Panel. "Over the last few months we have detected an increase in the frequency of purchases", recognizes Iñigo Fika, vice CEO of Aldi Spain. The value of sales increases, because prices go up, but the volumes –the amount that is bought– are flattening out, although it varies by company, it is perceived from Asedas.
You buy the same, you pay more: calculations from the OCU state that we spend an extra 830 euros per year on the shopping basket in 2021. According to data from CaixaBank Research based on spending on cards, in June the consumption of consumer goods basic necessities, where food comes in, was 49% higher than the same month in 2019. The figure is similar since January: it is due to both the increase in prices and the change in habits.
Now a trend reversal can start. “In June we see a certain slowdown in consumption. Confidence has begun to deteriorate. It continues to be dynamic but how the year will end is uncertain, the outlook is worse”, values Josep Mestres, senior economist at CaixaBank Research. Based on a follow-up of fuel consumption after their prices skyrocketed, he points out that low incomes are the ones that make the greatest adjustment if prices are raised. "In the lower percentiles, more income is spent on food and energy," he argues.
It compares more, it looks where it is bought, it throws substitutes –in oils, meat or fish, for example–. "42% opt for cheaper brands, especially white brands, 33% give up non-essential products such as whims and 21% have stopped buying or reduced spending due to high prices on meat, fish, fruit or vegetables." "The own brand represents 53.1% in the basket, two points more than last year, the highest rise in four years," they point out at Aldi, where they expect it to continue to rise. “There are more and more basic products in the basket, such as pasta, rice or legumes”, it is added.
The changes can be a symptom of something deeper, of going into crisis mode. “For a large part of families, inflation is worse than a crisis. The rise is focused on basic necessities, affecting the most vulnerable economies the most, ”explains Enrique García, spokesman for the OCU. The last big drop in consumption dates back to 2008, reviews García Magarzo. Declines of up to 9% were seen in food retail sales. “The return of the summer is a difficult moment. Everyone is adjusting margins because if they don't they lose customers. It's similar to 2008, but no one knows if a consumption crisis will come, nor is it wanted, ”he says.
A recession is not necessary (technically in Spain it would not be reached until the first quarter of 2023 if everything goes wrong) to act like one. “The consumer does not react when things happen, but when he is afraid that they will happen. At the end of the summer, if the feeling continues to be that we are going into a crisis, it will cause the client to put themselves in that situation before they have it. Everyone talking about September will make it a self-fulfilling prophecy... If we believe it will happen, it will happen”, predicts Valencoso. "What affects consumption is not so much the CPI, but the fear of recession, a future scenario that is beginning to be more frightening," he insists. That confidence in the future of the economy be lost, agrees with Asedas. Although spending on food "is inelastic and lasts a long time" it can see falls, Valencoso believes. He would go on to target stores where a lower price is perceived, those with a short assortment (Mercadona, Dia) or the hard discount segment (Lidl, Aldi), he explains.
Ironically, in this worst case scenario, the industry and the client would feed off each other. "The consumer is more sensitive, but it is going to be above all the industry that is going to cause changes in behavior," they warn in Kantar. Because more promotions and more attention to price will come. But that they begin to fall will depend on the cost of energy and raw materials, it is stated from the sector. The feeling is that it's time to wait and checkout, approaching the limit...
