After a year of sluggish economic growth in 2013, it is no surprise that consumers are beginning the new year with a conservative outlook. In fact, IRI’s MarketPulse survey found that shopper sentiment dropped in Q4 2013, and this gloomy attitude is spilling over into 2014 across all age groups. It is particularly evident among millennials, who reported a 10-point decline since Q3 2013 and have consistently struggled since the economic downturn began.

 “The economy is slowly returning to a healthier state, but the road has been longer and harder than anyone expected, and it has been littered with obstacles,” says Susan Viamari, editor of Thought Leadership, IRI. “As a result, consumers are holding strong to the strategies that saw them through the worst of the downturn.”

IRI Shopper Sentiment Index Declines at Close of 2013

IRI’s Shopper Sentiment Index provides deep insight into how the economy is impacting consumers and changing how they approach grocery shopping. The index provides perspective in terms of price sensitivity, brand loyalty and changes in spending required to maintain desired lifestyles. With a benchmark score of 100 based on Q1 2011 information, a Shopper Sentiment Index score of more than 100 reflects consumers who are less price driven, more loyal to favorite brands and better equipped to maintain their desired lifestyle without changes.

The latest index for Q4 2013 is 102, which dropped after hitting a two-year high of 109 in Q3 2013. The fourth quarter also marked the first negative quarter of 2013. A number of factors likely contributed to shopper confidence being shaken, such as the debt ceiling crisis (73% awareness), the rollout of Obamacare (75% awareness), and the conflict in Syria (90% awareness). In addition, the reduction of food stamp benefits, otherwise known as the Supplemental Nutrition Assistance Program (SNAP), will increase financial pressures for 48 million Americans.

Consumers Not Loosening Purse Strings in 2014

Going into the fourth year post-recession, consumers are still finding it difficult to maintain their desired lifestyles and are struggling to make ends meet. The Q4 2013 MarketPulse survey results clearly point to why many consumers continue to face tough times:

• 83% of consumers are having difficulty affording their regular groceries
• 39% feel their financial situation is worse today than one year ago
• 43% say their financial position is unchanged versus one year ago

As a result of these ongoing difficulties, consumers will continue to trim expenses by following conservative usage patterns throughout 2014:

• 53% are working to make personal care products last longer
• 51% are finding ways to make cleaning products last longer
• 49% are cooking from scratch more/using fewer convenience items to save money
• 40% are making beauty care products last longer by using fewer, using less frequently, etc.
• 29% are sharing more products

And, it doesn’t stop there. When making purchases, consumers also are demonstrating adeptness for saving that has been honed over the course of the downturn. For instance, 90% are eliminating unnecessary purchases, and 67% are making shopping lists prior to going to the store.

“Our results clearly indicate that 2014 will be yet another challenging year for consumers and CPG marketers alike,” concludes Viamari. “But, both parties have demonstrated resilience and the ability to adapt quickly to challenges and opportunities. CPG marketers must hold on to that resilience this year and continue to provide shoppers with exciting products that make life easier and more affordable with a targeted value proposition.