Consumers' goodwill in brands has taken a hit with the ongoing high food and fuel inflation experienced in Singapore.
High food and fuel inflation are taking a toll on Singapore's consumers and food and beverage (F&B) businesses. Both manufacturers and food service operators are passing down costs to consumers through price hikes or shrinkflation (when the volume or weight of a product has decreased while maintaining the same price point), especially when consumers are becoming more price sensitive.
According to GlobalData, 57 percent of Singaporeans are highly concerned about the impact of inflation on their household budget.
Tim Hill, Key Account Director at GlobalData Singapore, commented that Singaporeans have become more frugal amid the volatile food and fuel prices and looming fears of another economic recession.
Thrifty consumers are poised to shop at open markets, where they can drive bargains, cash and carry stores with bulk discounts, and online stores for price comparison. Accordingly, 85 percent of Singaporean respondents in GlobalData's Q4 2022 consumer survey keep a strict household budget, while 90 percent stated they would buy cheaper alternatives or retailers' brand products.
"The food service sector is also taking a hit as only 43 percent of the survey respondents said they would eat out at restaurants, compared to 86 percent who would cook meals at home," said Hill.
Bobby Verghese, Consumer Analyst at GlobalData, added that While companies are pressured to raise prices to sustain revenues, they fear upsetting cost-conscious patrons. Instead, F&B manufacturers and food service operators resort to shrinkflation to maintain payments.
"This involves reducing the portion sizes in each pack or plate without proportionally lowering the label or menu prices. As shrinkflation raises the unit price of products, consumers get less value for their money," revealed Verghese.
Brands and companies are never likely to reveal the shrinking of products.
Hill stated that if consumers notice shrinkflation, this can drive them to choose other brands or labels. Recent events of shrinking food portions at various eateries have upset several Singaporeans as consumers publicised and critiqued the shrinking online. This public sharing of shrinking product size can permanently damage brand imaging to consumers.
GlobalData forecasts that inflation will remain persistently high at 4.6 percent in Singapore, implying that consumers will continue pinching pennies. More manufacturers are expected to adopt shrinkflation tactics to prop up their margins until inflation eases," concluded Hill.
