Retailers and brands: six steps to leverage the cost-of-living crisis and grow your plant-forward business

Cost-of-living crisis: a golden opportunity for plant-forward businesses?

Upon entering a new year, there will be things we want to leave in the past and others we want to bring into the future. Unfortunately, last year’s cost-of-living crisis has stepped into 2023 with us and it looks set to stay for a while yet. 

What is the cost of living crisis?
The fall in ‘real’ disposable income that people of many European countries have experienced since the end of 2021 is being fuelled by factors like tax hikes and high inflation, which is outpacing wage and benefit increases.¹  

Food inflation is having an immediate impact on grocery prices, affecting everyday consumers and businesses alike. According to Statista, the inflation rate for food and non-alcoholic beverages in the European Union reached a staggering 17.9% in November 2022.² Consumers are reacting by purchasing fewer treats and reducing their overall budgets and consumption.³

Additionally, people are changing what they are buying and from where: 

• 17% of shoppers have switched their usual supermarket for a cheaper one. 
• Approximately half of consumers are eating out less compared to six months ago and expect this trend to continue in the next six to 12 months. 
• 70% say they are more careful about food waste.
• Purchases of frozen and bulk-buy foods are on the rise.⁴

Impact on protein sales

One of the most notable consumer trends is the reduced purchase rates of meat, dairy, and egg products. For example, according to the AHDB,⁵ beef volume sales in the UK are down by 9.1%, total dairy is down by 6.2%, and lamb is down by 19.2%. Essentially, meat and dairy products have become a luxury due to price hikes.

Fortunately, plant-based alternatives have not been affected by inflation as severely as conventional meat and dairy. This is likely due to the much higher margins of alternatives, which may have acted as a buffer to absorb price blows. Meanwhile, supermarkets have had no choice but to raise meat and dairy prices with inflation. As this continues, the budget-friendly appeal of plant-based alternatives could potentially seduce a larger consumer base. 

However, many mainstream consumers perceive some plant-based foods as being ‘expensive’. Indeed, in a yet-unpublished ProVeg survey, 70% of European consumers agreed that plant-based food products generally cost more than animal products. Moreover, 49% of participants said they would choose plant-based products if they were cheaper than the animal-based equivalent, while only 23% said they would not.

This data indicates that brands and retailers must do everything possible to leverage lower price points for plant-based products compared to meat and dairy. Doing so can help to grow your customer base and increase revenues.

So, how can we take advantage of opportunities presented by the cost-of-living crisis? And what can we do to mitigate any adverse effects? Check out these six tips to get started.

1. Be honest and transparent with customers

Although you should aim to keep the prices of your plant-based product down, rising inflation rates may not always make this possible. To retain customers and attract new ones, it’s important to bear in mind that they are more likely to continue to support businesses that are trying to minimise rising costs, and are open about price rises. 

• Be frank: Most people understand that price increases are sometimes unavoidable for brands or retailers to survive. Be honest and open with customers about this; make it known that if you didn’t have to raise your prices, you wouldn’t. Additionally, communicate your price rises explaining reasons for the hikes so consumers know why they are paying more. 

Conversely, by not communicating about your price increases, you may be perceived as ignoring your customers’ needs as they contend with the cost-of-living crisis. Honesty will humanise your brand. 

• Communicate benefits: It’s also important to share the important benefits your product offers and what the buyer is investing in, such as health, limited environmental impact, animal welfare, great taste, functionality, freshness, local sourcing, etc. If your products contain high-quality, costly ingredients or require expensive production processes, explain this to customers. By communicating in a transparent, authentic way, consumers gain trust in your brand and are more willing to pay higher prices. 

• Communicate across platforms: There are various ways to communicate with your customers, such as on your business website, and via your weekly or monthly newsletter. If reducing package sizes, weight, or volume of your product(s) but keeping the price the same to cut costs (‘shrinkflation’), make sure to communicate this too, giving your reason for doing so to maintain trust. Use empathetic language that shows understanding and consideration. Communicating that ‘we are in this together’ or that you hope price rises are only temporary, can go a long way in building trust and loyalty, and ultimately, result in repeat purchases.

• Create content to support your customers: To solidify your business’s relationship with your consumers, go the extra mile by creating content and communications that focus on other ways shoppers can save money. In a recent survey, six in 10 consumers said that ideas on how to make their favourite meals on a budget would be appealing.⁶ You can position your brand as part of a clever grocery basket by offering suggestions on how your products can be part of affordable meals, and offer tips on repurposing leftovers made from or paired with your product. Help people to find new ways to make their favourite dishes on a budget, or new recipes that require less costly ingredients. Such communications offer vast opportunities to connect with and gain loyalty from customers.

To recap, actionable steps include:

• Be honest and open with consumers about price hikes, giving clear and comprehensible reasons for doing so.
• Use empathetic language in all communications to demonstrate that you understand consumers’ struggles and will help them to save money.
• Explain how product prices are determined and what the buyer is investing in.
• Let customers know if you adopt shrinkflation tactics.
• Share content that can enable consumers to make their fave meals on a budget or use up leftovers, framing your products as part of a great deal.

2. Constantly look ahead

As a business contending with a cost-of-living crisis, it’s important to keep tabs on what problems or solutions might be around the corner, consumer trends, competitor moves, and innovations that could improve your products or brand. 

• Look ahead: You need to think ahead to ensure you are prepared and capable of safeguarding your business against the worst while leveraging new opportunities. Both individual brands and retailers should consider various worst-case scenarios and plan for potential price hikes in their ingredients and production processes, as well as possible reductions in sales. Track consumer trends and watch your competitors to stay ahead of the game.

• Be elastic: Gain knowledge of price elasticities – for your category and individual products within it. Most brands and retailers regularly calculate how much they will need to raise prices in order to support increased expenses while still meeting revenue targets. However, making such calculations based on what the market can support today without thinking of future increased expenses can leave companies vulnerable to falling short of their revenue targets. 

• Buy ahead: Where possible, brands and retailers should work with suppliers to buy stock and/or ingredients in advance to beat future price hikes. However, if you don’t have a solid grasp of your customers’ evolving purchasing behaviours, avoid this tactic in case of wasted stock.

• Negotiate more: Efficient negotiation between retailers and suppliers (and brands and manufacturers) is pivotal to the success of keeping future prices down. 

• Pause or slow growth plans: If you’re a small business with dreams of scaling up, it may be wise to alter or pause plans for the moment. Look ahead to challenges that might come at you and figure out how to stay afloat, instead of looking to grow. While this might be a difficult decision, it may be necessary to keep your business running during uncertain times. You can realise your dreams of growth once the crisis is over, or do so at a slower pace for now.

To recap, actionable steps include:

• Look ahead and prepare for future problems or opportunities, consumer trends, what competitors are doing, and innovations that could improve your products or brand, and improve efficiency.
• Gain knowledge of price elasticities.
• Develop your negotiation skills while maintaining solid relationships with your suppliers.
• Consider altering, slowing, or pausing growth plans for the moment.

3. Offer promotions and discounts

Innova Market Insights found that cheaper prices will remain a key driver in 2023, while consumers will increasingly be committed to reducing spending.⁷ Even before the cost-of-living crisis, research found that price was the biggest inhibitor to the sale of plant-based products. Luckily, there are many ways to retain and attract price-sensitive consumers. 

59% of buyers look out for discounts and promotions more often than they used to in light of their reduced disposable income.⁸

• Offer targeted discounts: Discounting items is an excellent way to help those who are struggling to buy their favourite plant-based products. Price-sensitive consumers are more likely to purchase products that are discounted or on special offers – for example, buy one get one free. In a recent survey, 47% of people said deals and promotions would prompt them to buy from or visit a food retailer.⁹

• Run bulk-buy and meal deals: Bulk-buy and meal-deal promotions are ideal for keeping plant-based sales up while also increasing basket size. Meal deals are brilliant for promoting higher-priced luxury and indulgent plant-based products since these items can be framed within a ‘dining-in’ format. This will attract consumers who are cutting down on going out or ordering takeaways, and who are instead opting for more ‘fake aways’ as a way of cheaply entertaining. 

• Offer point cards and loyalty schemes: According to The Grocer, 17% of shoppers have switched their usual grocery store for a cheaper one.¹⁰ Against this backdrop, how can businesses retain customer loyalty and attract new shoppers? Retailers and brands (that sell products on their own e-commerce sites) can do this by introducing points cards and loyalty schemes. These should give signed-up customers special prices and offers on plant-based products, as well as insight into future promotions. However, don’t just put out offers and loyalty schemes willy-nilly, or you’ll risk wasting both time and money. 

• Play the health card: With promotions in mind, research shows that consumers buy fewer healthy foods when budgeting because these items tend to be more expensive. Yet, people want to remain healthy and if they could do so, would continue to buy healthy products. Indeed, the majority of consumers think that brands should be responsible for helping consumers to eat more fresh and plant-based items.¹¹ With this in mind, include healthy plant-based offerings in discounts and offers to show that you are trying to help consumers to eat better when money is tight. When launching new products, use healthy recipes with affordable wholefood ingredients to promote wallet-friendly plant-based options.

To recap, actionable steps include:

• Offer targeted discounts and promotions on plant-based products, including luxury and healthy items, to retain consumer loyalty, increase basket size, and push higher-priced items.
• Run targeted loyalty cards and point schemes to attract and retain price-sensitive consumers.

4. Introduce budget-friendly or own-brand ranges

Research shows that there is an uptake in the number of consumers buying from value and own-brand ranges during the cost-of-living crisis. Indeed, a recent survey found that over a third of Brits are switching the branded products they prefer for cheaper options, such as supermarket own-label items.¹²

• Launch affordable offerings: Producing a new budget-friendly or own-brand product line to help consumers who love your products but struggle to afford them can go a long way. Whether you are a plant-based business or a retailer, offering a new line for penny-counting consumers can potentially boost sales and loyalty. 

• Highlight budget-friendly products: If you already have own-brand and/or value plant-based ranges, be sure to spotlight those to your consumers. Flag them on your website and position them at your store entrance and at the start of shopping aisles. Consumers are not the only ones to benefit from such offerings. Own-brand product lines enable retailers more control over costs and an opportunity to gain loyalty from customers.

To recap, actionable steps include:

• Push your own-brand and value plant-based ranges – place them in visible areas of your store and flag them on websites.
• If you don’t have an own-brand or value plant-based range, get in touch with ProVeg at [email protected] to discuss creating one. 

5. Invest in data, technology, and talent acquisition

Retailers and brands have access to a lot of customer data – for example, buying habits (e.g. do many of your consumers bulk buy? Do the majority shop weekly or monthly?) and purchasing preferences (e.g. do more people buy oat milk or almond milk? Are your customers health-motivated?). 

• Leverage your data: Valuable consumer data can be leveraged to help you better understand what your customers need, want, and value most, as they prioritise purchases differently when money is tight. It will enable you to identify the most desirable items to stock and the number of units. 

• Invest in data, tech, and talent: Making wise investments in technology and talent that can organise and analyse data is key. Outsourcing is highly recommended as it is cheaper and less time-consuming than doing it yourself. 

• Become more consumer-centric: Data-driven decision-making will allow you to deliver more consumer-centric product offerings, and agile and refined price and promotional management to help mitigate the effects of the cost-of-living crisis. 

• Manage your operations better: Investment in digital initiatives can also be used for process management to solve supply-chain issues (which many brands and retailers are currently experiencing) and inefficiencies around inventory management and distribution.¹³ Technology to map and monitor the sourcing and movement of goods is now “intrinsic in the optimal running of food and drink businesses”, according to a recent article in Food Manufacture.¹⁴ 

To recap, actionable steps include:

• Invest in technology and talent to access, organise, and understand data on your customers’ buying habits and purchasing preferences. Use this to work out what and how many items to stock. 
• Use data to improve process management and solve supply-chain issues, sync and streamline in-store and online offerings, save money on operational costs, and eliminate any wasteful activities.

6. Innovate all aspects of your business

It’s important to try to see the silver lining in any bad situation. Even when times are tough, we can use the experiences and learnings we gain to make changes and improve things. 

• Take a fresh look: As the cost-of-living crisis persists, study your company in its entirety – look at its relationships with consumers and suppliers; scrutinise production, energy usage, carbon footprint, logistics, retailing, marketing, etc. What needs work and what can be streamlined? And where can costs be reduced and efficiency improved? 

• Revisit your operation: Retailers, consider whether your suppliers are too expensive, or if you could stock a cheaper version of a product of equal quality. Brands, you may want to search for more cost-effective manufacturers, or innovations in technology that could be used to improve your product’s taste. These are all examples of the types of considerations that you should be bearing in mind to save money and maximise sales. 

To recap, actionable steps include: 

• Review your whole business and see what savings, improvements, and innovations can be made. Get in touch with ProVeg at [email protected] to take advantage of our expert consultancy services. 

Conclusion

Although the economy faces months of hardship and uncertainty, retailers and brands can retain and even boost plant-based sales by implementing six relatively simple actions. 

To leverage the cost-of-living crisis, ProVeg recommends the following best-practice strategies:

1. Be honest and transparent with customers.
2. Constantly look ahead.
3. Offer promotions and discounts.
4. Introduce value and/or own-brand plant-based ranges.
5. Invest in data, technology, and talent.
6. Innovate all aspects of your business.

For more expert advice on how to boost plant-based sales, get in touch with ProVeg at [email protected] 

Make sure to head back over to the New Food Hub next week, to read our cost-of-living crisis article aimed at manufacturers!

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