Although it is true that in the last fortnights of the year we began to see signs of improvement, such as the decrease in the price of the basic basket, the reality is that we are far from seeing controlled inflation and in line with the objective of the Bank of Mexico ; For that, there is still a long way to go.
It is important to mention that the supports have existed. Both consumers and manufacturers have received support of various kinds. Perhaps the most emblematic are the adjustment to the minimum wage that happened in 2022, and that by 2023 it will be more than 20%; and the famous Package Against Inflation and High Costs (PACIC), which exempts producers from paying general import tax, among others, with the purpose of maintaining the price of the basic basket at 1,039 pesos until the beginning of 2023.
Despite these supports, and other sources of income that households have, such as the highly acclaimed remittances, it seems that the pocket can no longer take it. According to recent studies, households are facing price increases above inflation in the mass consumption basket (Fast-moving Consumer Goods), which has brought purchase volumes to growth rates close to zero.
For example, in the third quarter of the year, family spending in FMCG grew 12% against the previous year, while the volume saw an evolution of only 0.4%. The above is equivalent to spending 12% to buy just the same volumes.
It is in food where the general rise in prices is accentuated; since, 83% of these categories increase prices above inflation. Edible oils, flour, cereal bars, and pasta rooms are some of the most impacted – same that have been transferred to a large extent to the consumer. Also the baskets of Alcoholic Beverages, Dairy Products and Home Care show increases above inflation
How does the consumer defend himself against price increases for mass consumption?
The consumer has adopted five very clear defense strategies to make their spending work: (1) prioritize spending in basic FMCG categories, (2) expand the repertoire of channels, (3) change product formats-sizes, (4) purchase own brands and (5) returns to off-line channels for household basics.
The consumer is prioritizing their spending to basic categories of mass consumption. Above all, the base of the population pyramid, who according to AMAI information, allocate close to 50% of their money to food. We also observe that the shopper you are restricting and limiting your purchase. Hence the size of the trip does not grow and the pantry mission shrinks. In this same dynamic, we see that the consumer adapts and changes product formats and sizes according to their needs and ability to pay.
An example of the above is that the medium-low levels choose to reduce the size of the packages throughout the entire FMCG consumer basket; the above, in search of lower disbursements. Conversely, the medium-high levels, which on average have greater purchasing power, choose to switch to larger sizes in various categories to reduce price increases based on better performance per kilo or liter.
This is clearly observed for food and dairy products; baskets where home purchases also return to offline channels (physical stores), contrary to the 2021 trend, when online sales led the growth of the industry.