Will Consumers Cut Spending in 2010 Too?

Faced with continued uncertainty about their economic future, American consumers are expecting to be even more frugal in 2010 than they have been this past year, according to a new survey by global business-advisory firm AlixPartners.

The company asked Americans above the age of 25 about their expected purchasing behavior for groceries, personal care and home care items. The results indicate that in coming year Americans will be cutting back in their spending for packaged and prepared food, cosmetics and personal care items, and laundry and household cleaning items.

“We are seeing an evolution of the American consumer,” said David Garfield, a managing director at AlixPartners and a leader in the firm’s CPG practice. “Where this past year consumers had been ‘value shoppers,’ they have evolved into ‘value-hunters,’ tracking down deals and perceived value.”

The biggest spending decreases were expected to be in cosmetics (down 8.7% among women) and prepared foods/prepackaged meals (down 7.5% among all respondents), followed by health and personal care items (down 3.4% among all respondents). Overall, 75% of the respondents said they expected to adopt more frugal habits when shopping for food and 55% said they would be scaling back their buying of household care products.

According to Garfield, the declines vary by product category.

“With food purchases, 54% of respondents say they will be looking for items on sale, and 36% will be buying store brands or generics,” he said. “In personal care, consumers plan to spend less overall, but indicate they will remain loyal to brand names.”

These results suggest that CPG manufacturers and retailers need to exercise discretion in the year ahead, said Rich Vitaro, a director at AlixPartners. “Although the trend toward frugality is pretty clear, we are seeing some interesting differences based on both gender and geographic region. For example, customers in the south appear less likely to change their buying behavior over the next year than people in other regions. At a time when the CPG industry is already facing lower sales and tighter margins, companies will need to adopt more strategically targeted marketing strategies and leaner cost structures to succeed.”

The AlixPartners Consumer Products Outlook surveyed 600 Americans ages 25 and up across four key demographic attributes: age, gender, region and race. More info: www.alixpartners.com