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The Levercliff view on inflation

Inflation is back. Food and drink prices started rising in August last year, it reached 5.4% in December and will climb higher. How will this affect business?

Inflation is back. Food and drink prices started rising in August last year, it reached 5.4% in December and will climb higher. How will this affect business?

Value for money will be king

According to Nielsen, consumers will stick to their shopping lists. But they won’t buy as much or the same quality as before.

They will look for ways to save money on meals, searching out influencers like Jack Monroe ('Cooking on a Bootstrap’).

On the other hand, better off consumers may trade up. They are likely to switch from food service to more entertaining at home, and will be searching for treats.

Nielsen data suggests that meat is the main category that will be impacted. Consumers will cut back, or switch to cheaper cuts.

Plant-based meat alternatives are more expensive, so growth in these will slow.

Sustainability will come at a cost

According to our research, three quarters of consumers care about the environment and want to buy sustainable products. The barrier is affordability.

Some consumers are happy to pay more. But most believe any additional costs should be absorbed elsewhere – by manufacturers, retailers or the government.

As inflation bites, consumers will be even less willing to pay a premium. And as the market becomes more competitive, some manufacturers may cut corners.

In our view this would be a mistake. Even in a price sensitive environment, sustainability matters and it needs to be done right.

Consumers can spot greenwashing a mile off.