Consumers to Campbell's: No Soup For You!
The new frugality takes a bite out of even the cheapest eats.
According to the Wall Street Journal, consumer spending on food fell an inflation-adjusted 3.7% in the fourth quarter of 2008, the biggest drop since World War II. And it’s not just that consumers are turning to lower-priced options - they’re buying less, period.
Campbell’s Soup (CPB), a classic recession play for its affordable dinner options, is scrambling to realign its product offerings with changing consumer preferences. For example, a sales campaign offering 10 cans of condensed soup for $10 didn't boost sales as much as the company hoped. Research showed that while buyers liked the per-can price, they were reluctant to shell out more than was necessary for meals in the immediate future. In short, making rent takes priority over stocking the pantry.
Campbell’s, along with Kraft Foods (KFT), is trying to appeal to a clientele that wants to save a few pennies without settling for the same old boring fare every night. The Journal reports Kraft now has an iPhone (AAPL) application to help users manage shopping lists and search recipes, and Campbell’s is coming out with fancier canned soup options to appeal to a broader array of potential buyers.
This trend away from bomb-shelter grocery shopping and general extravagance may not just be some passing fad. Shoppers are stretching budgets further - not just by buying cheaper items but by simply spending less. And with the economic future cloudy at best, a swift return to gastronomic luxury is unlikely.
Budgets are back in vogue, and purchasing in bulk to save a few bucks isn’t as viable a grocery strategy as it used to be. This doesn’t bode well for Costco (COST), which banks on customers buying more soap, cereal or frozen chicken breasts than any normal family could possibly consume in months.
Credit, once the lifeblood of consumer spending, is well-nigh impossible to find. Coupled with the broadening repudiation of debt in general, frugality could be here to stay.
Pass the Spam.
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