Dairy Processing - November/December 2022 - 47

SUPPLY CHAIN
the
new way
Companies aim to meet evolving consumer preferences.
by Kristen Putch | kputch@sosland.com
S
ince the supply chain issues of 2020 and 2021 have
eased, companies can now better focus on reaching
consumers in fresh ways.
A recent survey from McKinsey found that three-quarters
of dairy leaders reported neutral or improved margins in
2021, a slight increase from 2020. Retailers have added an
array of new and unique dairy products to their private brand
portfolios in an effort to offer variety in the category and
stay competitive.
Producers are often the first hit by tough economic
environments. Consumer behavior in an era of mission-driven
and price-sensitive purchasing caused uncertainty for dairy.
A surge in demand for dairy products in 2020 improved the
overall economic performance of the industry in the midst
of great challenges. In 2021 the industry saw stabilization.
But, the industry has proven its resilience and ability to adapt
creatively.
THE PRICING SURGE
According to McKinsey, the last couple of years have
significantly altered how consumers shop for CPG goods.
Most metrics of consumer behavior - such as confidence
and price sensitivity - have improved since last year but are
still up from 2019 levels. For example, 36% of consumers cut
back on spending in 2021, compared to 41% in 2020. McKinsey
also reports that 45% of consumers report paying attention to
46 NOV-DEC 2022 | DAIRYPROCESSING.COM
prices in 2021, compared to 51% in 2020 but 29% prior to the
pandemic.
Consumers are exhibiting some conflicting impulses. They
are both more likely to purchase less expensive products,
but also pay premiums on specific attributes. For example,
McKinsey reports 59% of consumers are willing to pay more
for healthier products and 54% for better animal welfare.
While inflation continues to be a pain point for consumers,
retail food and beverage price increases are finally beginning
to slow, according to recent data from IRI.
Prices in September were 13% higher than the same time
last year, but they did not grow significantly from July to
September. The market research firm said the flattening price
curve is a noticeable deviation from the consistent increases
between January 2022 and July.
" September data revealed some welcome news for
consumers: price inflation is slowing down for the first time
this year in the perimeter categories that account for nearly
$200 billion in annual retail sales, " said Krishnakumar Davey,
president of thought leadership for IRI, a Chicago-based
market research firm. " However, overall grocery bills are still
significantly higher than this time last year, causing shoppers
to shift their purchase habits. "
Consumers are bargain hunting, shifting to larger pack
sizes and steering clear of highly inflated categories to avoid
large grocery bills. Quick trips to the store also have become
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Dairy Processing - November/December 2022

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