What impact have inflationary pressures had on Kiwis’ love-affair with foods derived from plants?
Economic challenges have led to a clear shift in consumer behaviour. Shoppers are increasingly adopting a variety of cost-cutting strategies, from meal planning, hunting for deals and substituting products, to downsizing purchases and occasionally going without. Consequently, while total grocery sales have increased in terms of dollars, the quantity of goods purchased has not kept pace. In essence, people are spending more money, but getting less in return. This begs the question: how have inflationary pressures affected sales of plant-based foods, products commonly positioned as premium options?
According to Circana’s Cost of Living Survey, conducted in March of this year, 42 percent of New Zealand household shoppers are eating less meat as a means of saving money. The trend of reducing meat consumption is not new; red meat intake per capita in New Zealand has declined by 11 percent over the past decade and a staggering 45 percent compared to 20 years ago.
In a 2021 plant-based study by Circana, health emerged as the primary motivator for reducing meat consumption, with weight loss and cholesterol reduction, as well as overall health and nutrition being driving factors. However, the sharp rise in the cost of living, and the subsequent pressure on household budgets, has become an additional influencing factor in Kiwis’ dietary choices.
During the pandemic, sales of meat alternatives enjoyed a significant surge as consumers sought out healthy protein substitutes. In annual sales to May in 2021 and 2022, these products experienced year-on-year value sales growth of more than 11 percent, accompanied by strong unit growth. However, fast-forward 12 months and quarterly data to May 20235 shows the category has experienced a slowdown. Interestingly, there are some segments which have thrived, most notably, vegetarian bites – which includes products such as nuggets and tenders. These represent $1 in every $5 total category spend, and have exhibited 28 percent value growth and 20 percent unit sales growth in the latest quarter. Specifically, Let’s Eat, a plant-based brand launched by Inghams in 2020, has played a significant role in driving almost half the category’s growth. Their frozen tempura nuggets offer an affordable ‘fakeaway’ experience, appealing to consumers seeking to reduce overall spending.
Looking beyond meat alternatives to plant-based foods as a whole, sales surged over the past couple of years. In a special cross-category project conducted by Circana in 2021, plant-based products experienced annual growth of 11.5 percent, while overall food and beverage sales declined. One notable success story within this trend is the dairy-free shelf-stable milk category, which has more than doubled its annual grocery sales since 2018. In the past year alone, grocery sales of these milk alternatives, which include oat, almond, soy, coconut and rice varieties, surpassed $100 million.
However, categories that offer plant-based alternatives at premium price points are not faring as well as their counterparts. This is particularly evident in the yoghurt, fresh meals, ice cream and cheese segments. While consumers were previously eager to try perceived healthier choices within these categories, such luxuries may have become unaffordable during the current economic climate.
The World Health Organisation’s study Climate Change 2023: Synthesis Report – which has been dubbed a survival guide for humanity – identifies eating more plants and less meat as one of 10 solutions needed to mitigate climate change. While this is less of a driver for Kiwi consumers – Circana’s plant-based study in 2021 revealed environmental factors are a key motivation for just 27 percent of household shoppers – it is undeniably important. It’s therefore imperative companies continue to invest in product innovation to be better able to provide affordable plant-based alternatives for shoppers influenced by economic necessity.
Although there are some bright spots within the plant-based foods industry, not least dairy-free shelf-stable milks, premium-priced plant-based options have faced challenges as affordability has become a key driver in consumer decision-making.
At Circana, we predict that once inflationary pressures ease, we will once again experience a plant-based foods resurgence.
Sources: 1. Circana Cost of Living Survey March 2023 N = 1000; 2. OECD Data – Meat Consumption; 3.Circana Plant-Based Shopper Survey Oct 2021 N = 1000 household shoppers; 4. Circana MarketEdge Grocery Data; 5. Quarterly data to 07/05/23; 6. Circana Plant-Based Cross Category Report based on MarketEdge Grocery Data MAT 18/07/23; 7. Circana MarketEdge Grocery Data MAT 07/05/23.