Circana's latest consumption barometer for September 2024 reveals positive developments in Spain's mass consumption sector.
The report cites favorable conditions like lower food inflation, GDP growth, and an increase in disposable income, which, combined with price stability, have spurred demand across the sector. However, despite this broad-based recovery, the wine and sparkling wine categories have shown a unique decline, reflecting evolving consumer behaviors and preferences.
Lower Inflation Drives Recovery in Mass Consumption
Inflation rates in Spain have reached a new low, with general inflation dropping by 0.5 points to 1.5%—the lowest level since March 2021. This decline is largely attributed to reduced prices in fuel, electricity, and tourism-related expenses. Food and non-alcoholic beverage prices, measured by the CPI, also eased, falling to a rate of 1.8% in September, a notable reduction from previous months and significantly below last year's levels. Starting in October, VAT will be reintroduced on basic food items, which will initially set at 2% and later adjust to a super-reduced rate of 4%. This policy change will be monitored to gauge its long-term impact on consumer spending in essential categories.
Consumer Goods Show Moderate Price Increases
The consumer goods sector saw only a modest price increase of 0.7% year-on-year in September 2024, contrasting sharply with the double-digit rises experienced in the past two years. The most significant contribution to this increase comes from the food sector, where prices rose by 1.2%, while non-food items experienced a decline of 1.7%. Such moderation in price growth has further reinforced consumer confidence, helping to maintain positive demand trends.
Demand Remains Strong, Except for Beverages
Volume demand for consumer goods continued to show strength, with a 2.2% growth rate in September, extending a consistent trend of monthly gains for over a year. However, beverages saw a slight decline of 0.5%, with sharper drops in juice (-8.7%) and alcoholic beverages, including sparkling wines (-8.7%) and wines (-2.3%). These declines underscore a shift in preferences that contrasts with the overall positive momentum in other product categories.
On a cumulative basis, demand for consumer goods grew by 3.7% over the first nine months of 2024 compared to the same period in 2023. In the last twelve months, demand has increased by 4.1%, with 79% of product categories posting growth, up from 54% in 2023.
Price Trends and Private Label Growth
While inflation has softened, prices in 60% of product categories have risen in 2024, yet this figure remains far lower than the 96% seen in 2023. Private labels (PL) have gained traction, capturing 50% of market share in value, a 9% increase over last year. This growth indicates a shift in consumer preference toward budget-friendly options, aligning with the current economic environment and consumers' focus on affordability.
Changing Consumption Dynamics in Alcoholic Beverages
The decline in wine and sparkling wine consumption, despite the sector’s overall growth, is influenced by multiple factors:
- Economic Sensitivity of Alcoholic Beverages: Despite Spain's improved economic indicators, such as increased disposable income and lower inflation, alcoholic beverages remain sensitive to broader economic perceptions. Consumers appear to be prioritizing essential goods over occasional indulgences, potentially perceiving alcoholic beverages as non-essential or luxury items.
- Evolving Social and Cultural Norms: The shift toward telework and home-centered lifestyles is reducing the demand for alcohol. Wine and sparkling wine, often associated with social events, are less in demand as gatherings decrease or shift to more casual, home-based formats. This trend is accompanied by an increased preference for non-alcoholic and plant-based drinks, as consumers prioritize health and wellness.
- Health and Wellness Trends: The pursuit of healthier lifestyles is contributing to a decline in alcohol consumption. Consumers are increasingly selecting low-alcohol or non-alcoholic alternatives, as well as low-sugar options like plant-based beverages. This is part of a broader trend toward wellness-focused consumption.
- Perception of Price as a Barrier: Although alcoholic beverages like wine and sparkling wine have not seen the extreme price increases of other items, they are still perceived as luxury products. As consumers seek budget-friendly alternatives, demand for these beverages may continue to face pressure.
Implications for the Wine Industry
The decline in wine and sparkling wine consumption raises important questions for producers and distributors. While the drop may be temporary, it could signal a more enduring shift in consumer habits. Given the evolving landscape, industry stakeholders should consider the following strategies:
- Product Diversification: Adapting to consumer preferences by expanding alcohol-free options and developing limited editions may capture the interest of health-conscious consumers.
- Monitoring VAT Impact: With VAT reintroduced on basic foods, producers should keep an eye on consumer reactions, especially if this tax affects disposable income and shifts demand further away from discretionary purchases like alcohol.
- Enhanced Marketing Efforts: Tailoring marketing strategies to emphasize the social and experiential aspects of wine could encourage consumption. Additionally, emphasizing wine's health benefits (in moderation) and pairing ideas for home settings may resonate with consumers.
Sales Channel Trends: Online and Large Supermarkets Lead
The report highlights that online channels and large supermarkets are showing the best volume growth, up by 17.4% and 9.3%, respectively, over the past year. Hypermarkets, however, have seen a slight decline of 0.9%, reflecting consumers’ preference for convenience and accessibility, which online shopping and large-format supermarkets provide.
Source: Vinetur