Canadian are spending more on groceries, less on leisureThursday, June 16, 2016 > 14:27:10
(Canadian Grocer By Rebecca Harris/Marketing Magazine)
As food prices rise, consumers have to bit the bullet to buy basics
The rising cost of food is putting the squeeze on other (more fun) consumer spending categories.
According to Mintel’s 2016 Canadian Lifestyles report, food-related categories such as groceries and foodservice demanded the bulk of Canadians’ dollars in 2015. As a result, consumers are spending less on pleasure-related categories such as travel, leisure and entertainment. In fact, nearly three in four Canadians (73%) said they’ve cut back on things they don’t really need.
“Canadians are being hit on multiple different levels, and day to day, the costs are going up,” said Carol Wong-Li, senior analyst, lifestyles and leisure at Mintel. “You can’t get away from the basics, so with groceries you just have to bite the bullet. But that means you have to make different choices in terms of non-essentials.”
That creates an interesting dynamic for companies in non-essential categories, added Wong-Li. “If you take leisure, for example, companies used to have to only worry about competition within the industry,” she said. “Consumers only have so much to spend on non-essentials, so [different industries] now have to compete against each other.”
In the survey, 39% of consumers report spending more on groceries in 2015, with gains in the industry being fuelled by inflation, not consumption growth. As a result, the category saw a 3.7% increase in sales over 2014, to reach $90.4 billion in 2015.
Conversely, Canadians report they’re cutting back on alcoholic drinks outside of the home, with 38% saying they spent less. In addition, 36% report spending less on dining out. Still, the dining-out market grew 4.1% in 2015, reaching $54.5 billion.
Mintel notes that quick-service restaurants are a popular option since they meet the duel needs of affordable indulgence and time saving. Sixty-four percent of Canadians eat out at restaurants because they see it as a treat.
One third of Canadians (33%) report spending less on leisure/entertainment. The category grew at an average annual rate of 1.4% from 2010-15, hitting $40.4 billion in 2015. The slow growth is partially due to the fact that only 24% of consumers spent their disposable money on entertainment in 2015, on par with 22% of consumers in 2014.
Consumer spending on clothing, footwear and accessories has seen positive growth over the past five years, reaching $48.3 billion in 2015. Mintel notes that the sector has benefited from Canadians’ desire to balance their financial priorities between paying off debts and “treats.”
While growth in the sector is expected to slow, Mintel believes the influx of luxury retailers in Canada will counterbalance softness in the low- to mid-range sector.
“Obviously those who are affluent are going to remain engaged [in the category] and with the entrance of all these luxury brands and department stores, that’s going to keep them going back,” said Wong-Li.
“What will work well for the average consumer is that along with these luxury brand entrants, we have their off-price stores coming, such as Nordstrom Rack,” she added. “Canadians are not willing to necessarily trade down fully… There is a willingness to pay more for products that are perceived as higher quality with a greater promise of durability.”
Retailers can also capitalize on the affluent Chinese Canadian population, who place greater importance on buying current, unique items than average and show a greater inclination to spend on clothing and accessories. “They don’t necessarily need to make that choice, ‘do I need to spend on clothes or can I spend on leisure,’ so keeping them engaged is going to be huge, “ said Wong-Li.
Overall, total consumer expenditure in Canada reached an estimated $1.1 trillion in 2015, representing an increase of 3.9% over 2014.
Along with more conservative discretionary spending, becoming financially sound remains a top concern for Canadians. Two in five (37%) said paying off debt is their biggest financial challenge, followed by 33% who are focused on saving for retirement. Canadians are not overly optimistic about the future, with nearly half (48%) believing the economy will be worse off in a year’s time.