LONDON (Reuters) – British consumers are reacting to the cost of living crisis by trading down in both stores and products, switching from supermarkets to discounters and from branded to lower priced and private label products, a report from consultants McKinsey said on Monday.
Surging prices are causing the biggest squeeze on UK household incomes since at least the 1950s and consumer confidence is at near record lows.
Britain’s consumer price inflation rate hit 7.0% in March and economists polled by Reuters expect it will leap to 9.1%, its highest since 1982, when April’s data is published on Wednesday.
McKinsey said their survey found that 64% of UK consumers say they have responded to price increases by adapting their shopping behaviour in the last four to six weeks, with noticeable channel and brand shifts as they search for value for money.
Their survey found that a net 22% of consumers shopped more at a discounter, with a net 9% less at a supermarket and a net 32% less at a convenience store, which tend to have higher prices.
Recent supermarket industry data from market researchers Kantar and Nielsen has also shown a shift to discounters Aldi and Lidl despite a major focus by Britain’s big four grocers – Tesco (LON:), Sainsbury’s, Asda and Morrisons – to keep the prices of the most commonly bought products low.
McKinsey also found that a net 48% of consumers had traded down on household products, 40% had traded down on both snacks and confectionery and frozen foods, while 24% had traded down in bread and bakery products.
Elsewhere, there is evidence that cash-strapped Britons are eating out less, reducing car journeys to save on petrol and cancelling subscription streaming services such as Netflix (NASDAQ:) and repair warranties on domestic appliances.