High food and fuel inflation is taking a toll on both consumers and food and beverage (F&B) businesses in Singapore. Both manufacturers and food service operators are passing down costs to consumers through price hikes or shrinkflation, especially at a time when consumers are becoming more price sensitive. Accordingly, 57% of Singaporean respondents said they were extremely concerned about the impact of inflation on their household budget*, in a recent survey by GlobalData, a leading data and analytics company.
Tim Hill, Key Account Director at GlobalData Singapore, comments: “Singaporeans have turned frugal amid the volatile food and fuel prices and looming fears of another economic recession. Accordingly, 85% of Singaporean respondents in GlobalData’s Q4 2022 consumer survey are keeping to a strict household budget*. Additionally, 90% of survey respondents said they would buy cheaper alternatives or retailers’ own brand products*. 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. The foodservice sector is also taking a hit as only 43% of the survey respondents said they would eat out at restaurants, compared to 86% who would cook meals at home *.”
Bobby Verghese, Consumer Analyst at GlobalData, adds: “The spike in commodity and fuel prices, and rental and wage costs are stunting the F&B industry’s post-COVID-19 recovery. While companies are under pressure to raise prices to sustain revenues, they fear upsetting cost-conscious patrons. Instead, F&B manufacturers and foodservice operators are resorting to ’shrinkflation’ to sustain revenues.
“This involves reducing the portion sizes in each pack or plate, without lowering the label or menu prices proportionally. As shrinkflation raises the unit price of products, consumers get less value for their money. However, the drop in quantity is never publicized and is rarely noticed by consumers as packaged food is hardly ever purchased by grammage or liters, unlike the case with unpackaged fresh produce. Shrinkflation, thereby, has a silent impact on household budgets, unlike price hikes.”
Hill concludes: “However, in a rare event if consumers spot shrinkflation in their brand/label or foodservice venue, they may switch to other brands/labels or operators or postpone the purchase. Recently, Singaporeans who were upset by the shrinking food portions served at various eateries, posted their experience on social media, and the news went viral. Given how fast negative publicity travels through social media, it can damage a brand’s or label’s image and goodwill in the long term. GlobalData forecasts that inflation will remain persistently high at 4.6% 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.”
* GlobalData Q4 2022 Consumer Survey – Singapore with 516 respondents, published in November 2022
