With inflation, the war in Ukraine, the food crisis and even the effects of the Covid-19 pandemic impacting Portugal’s wallets, many are already forced to make choices when shopping in supermarkets. Consumption habits are changing due to the rising cost of living and national consumers, for example, are already buying some products in smaller quantities.
Gonçalo Lobo Xavier, director general of the Portuguese Association of Distribution Companies (APED), reports to Multinews that last year was one of two contradictions: there was an increase in private consumption in the first half of the year, “due to the existence of a budgetary space that families had that occurred in terms of hotels and restaurants, contributing to an increase in employment and economic growth”, and then, from September, “the scenario was reversed, with a very significant reduction of private consumption in the field of food”.
The official points out that this reduction in food consumption averaged 10% in the months of October and November. In December, with the Christmas season and New Year’s festivities, “the month was already better”, even though there are no official data, and APED member companies have not yet closed the annual balances for 2022.
Less meat and fish, more eggs. Consumers are ‘on the hunt’ for deals
As Gonçalo Lobo Xavier reports to Multinews, the consumption habits of the Portuguese are changing due to the price increase that has taken place in recent months. “Available data shows that there are notable declines in the consumption of more expensive basic necessities, such as certain categories of fish or meat, registering losses of 10 to 15% in certain more expensive areas,” the official points out.
For example, the consumption of this type of protein has been ‘redirected’ to other types of lower value. The general manager of APED reports an increase in the demand for and consumption of eggs in supermarkets, with a lower consumption of meat and fish.
Portuguese consumers are also increasingly “making very rational and sensible choices and trying to be very alert to promotions”. According to data provided by APED to Multinews, 50% of total food retail purchases are currently made through promotional activities.
The so-called ‘white labels’ are also increasingly popular and already represent a total weight of 35% of all purchases by APED members.
“This adjustment of consumption behavior in the light of socio-economic conditions necessarily leads to less loyalty to a retailer and an increased demand for the best promotion,” explains Gonçalo Lobo Xavier.
Increased transport and logistics costs, raw materials, energy and packaging are difficulties
Asked about the main difficulties and obstacles faced by the retail and distribution sector in recent months, Gonçalo Lobo Xavier notes: “with particular emphasis on the pressure of energy costs, especially fossil fuels and electricity, and the increase in cost factors of production, transport and logistics”.
“In addition to the effects felt in terms of cost and availability of raw materials and transportation constraints, it is important to highlight the escalation of packaging costs (plastic, cardboard and glass), which continue to grow and put strong pressure on industry,” adds the official, who believes the industry has shown “resilience”, “efficiency” and “commitment to quality and customer satisfaction”.
On the other hand, the head of APED deplores the government’s decision to proceed with a new tax on food distribution “unparalleled in the European Union”, which is seen as “a sign in the opposite direction and unfair in relation to the effort made by the industry to ensure the functioning of the supply chain”.
Prices could rise if energy prices remain high, warns APED
Gonçalo Lobo Xavier points out that the distribution sector has made efforts to control prices, through efficiency and logistics capacity, “by decreasing and crushing margins”, even “in an unfavorable context”.
“Food retail is a low margin business, around 2% to 3%. Not only in Portugal, but throughout Europe. The growth in the cost of factors of production, namely with the pressure on energy bills, has affected the entire value chain from agricultural production, transformation, industry, logistics and transportation, leading to rising prices,” explains the APED overview director.
Lobo Xavier warns that despite efforts to limit price increases, the situation is unbearable, especially if associated costs continue to rise in the industry.
“If the high prices of the energy factor continue, it will be difficult to maintain this moderation power in Q1 2023, especially in food retail,” APED’s director general concludes in an interview with Multinews.