In 2008, well before the GFC caused a meltdown in share markets and drove fear into the habits of Australian shoppers, rising costs bit into household confidence and cause a major shift in the attitudes of food and other consumer goods retailers.  In mid 2008, the double whammy of interest rates and fuel prices sapped confidence and started to fundamentally change food shopping habits.  The uncertainty created for the economy by the GFC added another layer of caution.

With a continuing focus on “value” the major grocers have taken a greater share of food spending.  Feeding off concern about the cost of living, the promotions pushed savings in the cost of meals – “feeding the family cheaper”. 

As the economy has recovered through 2009 and 2010 through the flow-on effects of Government stimulus and the ongoing boom in the mining sector, it seems the Australian food market is operating in a patchy economic recovery.

Employment numbers confirm that job and work time losses never got as bad as pundits expected.  The effects of the Chinese and Australian stimulus packages have kept the demand for labour strong, especially in mining and infrastructure, creating some shortages of skills that will keep cost pressures rising.  Other sectors show a different story – consumer durables remains in the doldrums through 2010 with deeper discounting failing to encourage a lift in spending, evidencing weak economic activity post-stimulus. 

Given we have a patchy recovery, the fight for customers hearts and minds seems fiercer.  Consumers have found satisfaction with cheaper lines and may resist being lured back to premium for longer period.  Eating-out is gaining increased share of spending but there is no consistent pattern that suppliers can rely on for broad-based growth in volume and value. 

The food market environment in fundamentally different from that in pre-GST times, requiring suppliers and marketers to carefully reassess their strategies and positioning in order to confidently grow volume and value and get any payback on innovation.