The Global Economic Crisis: The Impact On Consumer Attitudes & Behaviors In Germany

Introduction

72% of German consumers believe that they are currently living in a recession. This is indicative of an intensifying 'recessionary mindset' influencing consumer behavior. Symptomatic of falling consumer confidence is the fact that more than one-in-three German consumers experienced falling job security and almost two thirds falling confidence in the housing market in 2008-09.

Scope

*Detailed analysis documenting German consumers' 'recessionary mindset' and how this influences perceptions about current and future prospects

*Insights highlighting how the economic downturn has affected perceived quality of life, emotional wellbeing and financial security in Germany

*In-depth analysis of German shoppers' changing price sensitivity, value consciousness and attitudes towards private label across 4 major FMCG sectors

*Countries and categories covered: Germany; food and non-alcoholic beverages, alcoholic beverages, personal care and household care

Highlights

Over 40% of German consumers feel that their lifestyle has been impacted by the recession. Suddenly, they have been forced to re-evaluate their spending, including where they do their grocery shopping as well as their in-store choices.

54% of German shoppers are 'frequent buyers' of private label products. Many are now likely to consider private label products to be on a par, if not better than market leading brands across sectors.

For nearly two thirds of German shoppers, lower prices have a high amount of influence over where people do their grocery shopping. Nevertheless, the quality of products sold has more influence over their (changeable) grocery shopping destinations. This is symptomatic of the intensifying value-consciousness across FMCG product sectors.

Reasons to Purchase

*Gain a detailed understanding of changing consumer attitudes and behaviors amid the downturn in order to determine appropriate recessionary strategies

*Obtain country and sector specific insight about pertinent recessionary themes such as private label and consumers' value consciousness

*Assist consumer segmentation and targeting efforts by accessing data from two waves of primary research conducted in August 2008 and April 2009

Report Highlights
Highlights

Over 40% of German consumers feel that their lifestyle has been impacted by the recession. Suddenly, they have been forced to re-evaluate their spending, including where they do their grocery shopping as well as their in-store choices.

54% of German shoppers are 'frequent buyers' of private label products. Many are now likely to consider private label products to be on a par, if not better than market leading brands across sectors.

For nearly two thirds of German shoppers, lower prices have a high amount of influence over where people do their grocery shopping. Nevertheless, the quality of products sold has more influence over their (changeable) grocery shopping destinations. This is symptomatic of the intensifying value-consciousness across FMCG product sectors.
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Table of Contents 2
Table of figures 3
Table of tables 4
THE FUTURE DECODED 5
INTRODUCTION: Understanding how 'recessionary mindsets' influence Germans' attitudes towards and actual consumption is vital 5
The 'recessionary mindset' of German consumers is reflected by the widespread belief that they're in a recession 5
The economic downturn has had an impact on the lifestyles of more than half of German consumers but a growing number appear to be resistant to the recession 6
Key takeouts and implications: a 'recessionary mindset' has not yet been fully matched by a recessionary impact on Germans' lifestyles 7
TREND: Low consumer confidence is reflected by a generally negative outlook among German consumers 8
Germans are generally content with their quality of life despite pessimism about the country's direction 8
Key takeouts and implications: Germans' mood towards the direction of the country is less optimistic than other countries but they remain relatively upbeat of their quality of life 11
TREND: German consumers have lost confidence in their financial security and are being more scrupulous in response 12
Satisfaction with one's financial situation is low among German consumers 12
Perceptions about the economy, job security and financial status in Germany have all worsened and there is only limited optimism for the six months ahead 14
Germans are managing their finances more closely with some even struggling to pay the bills 18
Germans aspire to be less reliant on credit, but show no major change in their efforts to save 19
Key takeouts and implications: Germans have lost satisfaction in their financial situation and there is little optimism of any improvement coming towards the end of 2009 20
INSIGHT: The global economic crisis has had a negative impact on the emotional wellbeing of Germans with levels of stress up and personal happiness low 21
Stress levels have all been negatively impacted during the financial downturn 21
Germans' work-life balance has also worsened in combination with the deepening downturn 23
Germans happiness levels are below that of their global counterparts and declining in line with the global economic crisis 25
Key takeouts and implications: Germans are facing additional stresses in their daily lives accentuating already low happiness levels in the country 27
INSIGHT: Despite high exposure to a discount retail market, German consumers have become increasingly price and value conscious following the global economic downturn 28
German consumers are becoming more value conscious and therefore looking to save money when buying groceries 28
Price and value consciousness heavily influences where German consumers do their grocery shopping and how they shop, but quality still matters 31
Key takeouts and implications: the general value consciousness of Germans' has intensified and is increasingly reflecting how they determine where to shop 34
INSIGHT: Brand loyalties are under increasing threat as German shoppers give up brands and increasingly embrace private label 35
German consumers are beginning to give up some of their favorite brands as they make more 'considered' choices 35
Private labels are attractive to German shoppers in the downturn 36
Key takeouts and implications: the established value consciousness of Germans, combined with their current reflective consumption patterns and private label familiarity, should create an optimal platform for ongoing private label growth 40
INSIGHT: German consumers continue to embrace money saving tactics when it comes to food and non-alcoholic beverage purchases and preparation 41
German consumers are adopting various responses to cut back on food and beverage expenditures, 41
Many German shoppers consider private label food and non-alcoholic beverages to be identical or better than famous branded equivalents 46
Key takeouts and implications: a strengthening desire to cook more often at home has occurred while private label and market leading brand competition in food and non-alcoholic beverages will intensify 48
INSIGHT: The significant majority of Germans' personal care regimes and related product choices have been 'recession resistant' 49
Almost two in three German consumers are committed to looking their best in day-to-day life 49
Price and value conscious personal care/beauty shoppers in Germany are showing signs of trading up and trading down 51
Germans are largely unaware or indifferent towards private label personal care products 54
Key takeouts and implications: Germans' health and beauty regimes are proving to be largely recession resistant with private label alternatives already a key feature of the market 56
INSIGHT: Germans alcohol consumption patterns and preferences have not changed significantly during the downturn 57
German drinkers are careful about how much they spend on alcohol, but do not perceive that they have been making significant cut backs in the amount they consume 58
German drinkers have not become significantly more conscious of value-for-money in 2008-09 59
Private label alcohol is seen to be on a par with well known brands by one in three Germans 62
The image the alcohol beverage portrays is a key consideration for German drinkers 64
Key takeouts and implications: there has been little to no change in the habits of around two in three German drinkers suggesting that alcohol is largely 'recession resistant' in the country 65
INSIGHT: German household care buying preferences are heavily shaped by price consciousness irrespective of an economic downturn 66
Price led value is still the most influential factor for German household and laundry care purchases but preferences do reflect other important influences 66
The private label household care market in Germany is potentially lucrative given shoppers' desire for value and the comparably low penetration of such products 70
Key takeouts and implications: Germans' associate hygiene and cleanliness with wellbeing and this, combined with their inherent dislike of household chores, makes them somewhat quality conscious 73
ACTION POINTS 74
ACTION: Adopt a relentless approach to delivering and communicating better value-for-money option than the competition 74
Actively demonstrate value-for-money by re-appraising marketing initiatives, including slogans 74
Ensure that the value gains are instantaneous 75
Adopt astute 'mix management' marketing 76
Focus on quality to maintain differentiation and prove to consumers that quality really matters 76
Evaluate and adapt cost structures so that it is feasible to offer value-for-money solutions 77
Start planning for the longer-term by continually tracking German consumers as an economic recovery begins to become a reality 78
APPENDIX 80
Methodology 80
Further reading and references 81
Ask the analyst 82
Datamonitor consulting 82
Disclaimer 82
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List of Tables
Table 1: Consumer survey: level of satisfaction with ""the general direction of how things are going"" and ""quality of life"", in Germany (compared with the global average), 2009 11
Table 2: Consumer survey: satisfaction with current financial situation and importance attached to wealth/ income and having finances in good order, in Germany (compared with the global average), 2009 13
Table 3: Consumer survey: perceptions of whether broader economic conditions, household's financial situation, job security/confidence and housing market confidence had improved or worsened in the six month previous and how each might change in the proceeding six months, in Germany, 2009 17
Table 4: Consumer survey: propensity to feel tense and the extent to which perceived levels of stress have changed in the last six months and are expected to change in the next six months, in Germany, 2008-09 22
Table 5: Consumer survey: propensity to feel very tired and the extent to which perceived work-life balance has changed in the last six months and are expected to change in the next six months, in Germany 24
Table 6: Consumer survey: happiness levels and the extent to which perceived happiness has changed in the last six months and are expected to change in the next six months, in Germany, 2008-09 26
Table 7: Consumer survey: changing value-consciousness and desire to save money when buying groceries among German shoppers, 2009 30
Table 8: Consumer survey: changing efforts being made to use coupons, change grocery store choice to save money, embrace more disciplined shopping and gather and utilize store price information, among German shoppers, April 2008-April 2009 34
Table 9: Consumer survey: the relative cost/value and quality consciousness of Germans and global consumers overall when purchasing food and beverage products in 2008 42
Table 10: Consumer survey: the extent to which German consumers are making effort to save money by adopting various food and drinks consumption and preparation approaches, 2008-09 45
Table 11: Consumer survey: perception about the relative superiority or inferiority of private labels versus well known or market leading famous brands in food, soft drinks and hot drinks, in Germany, 2009 47
Table 12: Private label food penetration and spend ($ millions) in Germany, 2002-2012 48
Table 13: Private label non-alcoholic beverage penetration and spend ($ millions) in Germany, 2002-2012 48
Table 14: Consumer survey: the importance attached to looking one's best in day-to-day life, the pressure to look good, and satisfaction with physical attractiveness/ appearance, among German consumers, 2008 and 2009 51
Table 15: Consumer survey: the extent to which consumers are making an effort to save money by using spas or salons less often, in Germany, 2008-09 53
Table 16: Consumer survey: attempts made by Germans to change their personal care/beauty habits in order to save money, by product category, 2008-09 54
Table 17: Private label personal care penetration and spend ($ millions) in Germany, 2002-2012 55
Table 18: Consumer survey: perception about the relative superiority or inferiority of private labels versus well known or market leading famous brands for grooming/ beauty products, and agreement that such products are good alternatives to well known or market leading famous brands, in Germany, 2009 55
Table 19: Consumer survey: attentiveness towards the amount of money spent on alcohol and the degree to which alcoholic beverage consumers in Germany have cut down on the overall amount of alcohol bought/consumed, in 2008-09 59
Table 20: Total private label alcoholic beverage penetration and spend ($ millions), in Germany, 2002-2012 63
Table 21: Consumer survey: the degree to which household and laundry care consumers in Germany have cut down on the overall amount of alcohol bought/consumed in 2008-09 68
Table 22: Consumer survey: German attitudes towards doing housework, 2008 69
Table 23: Private label household care penetration and spend ($m) in Germany, 2002-2012 71
Table 24: Consumer survey: perception about the relative superiority or inferiority of private labels versus well known or market leading famous brands for household cleaning/laundry products, and how often such products are purchased to save money, in Germany, 2009 73
List of Figures
Figure 1: Datamonitor's Recession and Recovery portal will allow industry players to continually identify emerging opportunities and track what is happening in the German economy as it develops 5
Figure 2: More than two thirds of German consumers believe the country is in recession with this higher than the global average 6
Figure 3: Just over one in four German consumers feels that their lifestyle has not changed in light of the downturn 7
Figure 4: From a personal perspective, European and US individuals generally looked at 2008 negatively, but to a lesser extent in Germany 9
Figure 5: The majority of German consumers are inherently dissatisfied with how things are going in their country, but remain largely satisfied with their overall quality of life 10
Figure 6: More than two fifths of German consumers are currently dissatisfied with their financial situation 13
Figure 7: Germans' negativity about the economy at large is greater than that shown towards their personal situation 15
Figure 8: Just 11% of Germans expect economic conditions to improve in the period April 2009 through to October 2009, although slightly more believe their household finances will improve 16
Figure 9: Consumers in most major economies in Western Europe and the US, including Germany, anticipate being less well off going into 2010 18
Figure 10: German consumers are managing their finances more closely while a quarter of individuals report difficulties in paying all the bills 19
Figure 11: Germans are generally reluctant to sustain their reliance on credit and continue to demonstrate a strong need to save money 20
Figure 12: The economic downturn has also been accompanied by additional stress levels among Germans 23
Figure 13: Germans are prone to fatigue while more than one-quarter has experienced a worsening work-life balance in the period October 2008 to April 2009 25
Figure 14: One in three Germans had become less happy during the period October 2008 to April 2009 27
Figure 15: The majority of German consumers are more value conscious and are still looking to save money when buying groceries 29
Figure 16: German grocers continue to focus on low prices which further exacerbates consumer expectations 30
Figure 17: Quality of products sold has more influence than lower prices, promotional offers and habit on where people in Germany do their shopping 32
Figure 18: Germans have adopted increasingly pragmatic, 'mission focused' shopping habits to save money in the downturn 33
Figure 19: As the downturn has intensified, so too has the extent to which consumers have been forced to sacrifice some of their favorite brands 36
Figure 20: Private label range plays a role in where people shop, not just in Germany, but globally 38
Figure 21: Over one half of German shoppers routinely buy private label/store branded products in an effort to save money-far higher than the global average 39
Figure 22: The private label market is impacted by a broad range of drivers and inhibitors 40
Figure 23: Germans are value conscious in their food and beverage choices and a comparably higher proportion were sacrificing quality in 2008 42
Figure 24: In what is indicative of a value-for-money shopper mentality, taste and price are the key influencers in what food and beverages Germans buy 43
Figure 25: Germans, no doubt influenced by a retail environment with an established Discounter presence, are slightly more influenced by price than elsewhere 43
Figure 26: German consumers are adopting various responses to cut back on food and beverage expenditures 45
Figure 27: Germans are now more likely to treat themselves to a takeaway at least once a week 46
Figure 28: Germans' perceptions are that store brands are largely on a par with well known brands for food and non-alcoholic products 47
Figure 29: Germans are appearance conscious but are generally happy with how they look 50
Figure 30: As with food and non-alcoholic beverages, comparably more Germans than consumers from elsewhere opted for higher quality personal care products less often in 2008 52
Figure 31: Personal care/beauty shoppers in Germany and elsewhere are highly price conscious 52
Figure 32: Three in five Germans believe private label beauty products are good alternatives to well known market leading brands 56
Figure 33: German consumers are careful about how much they spend on alcohol, but do not perceive that they have been making significant cutbacks in the amount they consume 58
Figure 34: The majority of German drinkers have not become more value conscious in the on or off-trade in 2008-09 60
Figure 35: There is little evidence of any significant change in Germans' alcohol purchases with less than one in five buying cheaper brands or types of drinks in 2008-09 61
Figure 36: German drinkers are comparatively less influenced by alcohol promotions than their counterparts from elsewhere 62
Figure 37: One in three German drinkers believe that private label alcoholic drinks are good alternatives to market leading or famous brands which was marginally higher than elsewhere 63
Figure 38: Germans perceive the greatest degree of inferiority for private label beer products when compared to market leading famous brands 64
Figure 39: Habit/preferred is currently deemed as being more important to German drinkers than price 65
Figure 40: Price led value is the most influential factor driving Germans' households and laundry care purchases while promotional offers have become more influential in 2008-09 67
Figure 41: In 2008, German household and laundry care choices were made with greater consideration for cost/ value but consumers showed an ongoing desire for efficacy led quality 68
Figure 42: Germans value cleanliness, inherently dislike household tasks and seek to minimize the amount of time they spend on such tasks 69
Figure 43: More than two-thirds of Germans are 'frequent' purchasers of household care products on the basis of value-for-money which is consistent with consumers globally 70
Figure 44: Just over two in five Germans regularly purchase private label household care products to save money 71
Figure 45: The majority of Germans consider private label household and laundry products to be on a par to well known brands 72
Figure 46: Coles' 'Feed Your Family for Under $10' campaign is similar to an approach adopted by Sainsbury's in the UK 75
Figure 47: Manufacturers and retailers looking to deliver value-for-money must in the provision of factors associated with the PPI, but while also offering consumers lower than expected prices 77
Figure 48: Datamonitor's Recession and Recovery portal will facilitate forward thinking planning for those leading companies that start planning for the longer-term 79
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