CHICAGO (Dow Jones)--The downturn in the economy has changed consumer spending habits, particularly with regard to food, as shoppers are now focusing on value in both their grocery and dining out decisions, according to a Rabobank analysis.
The result is that food and beverage marketers and retailers must work harder to convince consumers to spend more.
"Five years ago, there was a growing trend of U.S. consumers willing to pay more for high quality, luxury goods," said Rabobank Vice President Stephen Rannekleiv, who is also a food retail analyst. "Today, there has been a 180-degree turn."
However, even though the changes have been driven by the economic downturn, the eventual return of good financial times doesn't mean the end of consumer frugality, he cautioned.
"In fact, it is possible, that this mindset could prevail beyond the current economic downturn," Rannekleiv said.
Overall, shoppers are "trading down," Rabobank said in a 2009 outlook report.
For instance, instead of buying steaks and other high-priced cuts of meat, shoppers are instead opting for less expensive cuts of meat or switching from red meat to poultry.
The Rabobank outlook also noted that consumers are increasingly choosing store, or "private label," products over the often higher-priced name brand goods.
Rabobank's analysis suggests that this "trading down" trend may next reach the alcoholic beverages category. Sales of premium spirits are still strong, but the bank notes there are reports of increased discounting by merchants in order to maintain sales that indicates "consumers are indeed becoming more price-sensitive."
The switches aren't just at the product level, either. Rannekleiv said consumers are seeking value in where they shop as well. A growing preference for discounters like Wal-Mart (WMT) is pressuring other retailers to keep prices low, he said.
As consumers trim their discretionary spending, the quest for value is driving restaurant decisions. Quick-service restaurants like McDonald's (MCD) and Burger King (BKC) and fast-casual establishments like Chipotle (CMG) and Panera Bread (PNRA) are seeing more traffic, but the shift is negative for more formal dining chains, Rabobank's report said.
The food service sector is responding to the economic challenges in a number of ways, Rannekleiv said, including promoting cheaper menu specials, improving healthy menu options and cutting costs in all aspects of the business.
-By Angie Pointer, Dow Jones Newswires; 312-750-4075; angie.pointer@dowjones.com