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March, 2024

Circana’s 2024 FMCG insights: AI, ‘funflation’ and the evolving concept of value

Circana has unveiled its first FMCG outlook report for the Australian market in 2024, delving into the trends that have carried over from 2023 and their impact on consumer behaviour, with a particular focus on the influence of economic challenges and the increasing use of AI in marketing.

Circana’s Head of Media, Insights and Analytics for Asia Pacific, Alistair Leathwood, noted that the retail sector is focused on supporting consumers and innovating through technology, despite higher business costs due to macro factors. He highlighted the changing concept of value in an economic climate trending towards disinflation, with consumers seeking everyday experiences and ‘little luxuries’ as a form of escapism.

“In an economic climate trending towards disinflation, the idea of value is changing as people search for everyday experiences and little luxuries as a form of escapism. Funflation continues to be a strong consumer trend as big-ticket expenses continue to be out of reach for most Australians,” said Leathwood.

Despite disinflation, Australians are still paying higher prices than three years ago, during the height of the pandemic. The report reveals that 90% of Australians across all ages are concerned about the continued high prices of food and groceries. 45% of Australian shoppers are willing to compromise on their favourite brands to save money; 40% are being more cautious against trying new products and 73% are more considered in their spending.

Don Unser, President of Thought Leadership at Circana, said: “Consumers have developed a different way of thinking about their purchases as their spending power has deteriorated.”

Leathwood also highlighted the trend of ‘funflation’, where consumers are willing to spend on joyful distractions like concert tickets. He suggested that the meaning of value is evolving, with shoppers now valuing promotions and special offers rather than price consistency.

The report also emphasises the rise of ‘lifehacking’ trends on social media and the increasing use of AI in marketing, with tools like Shopify Magic helping online retailers to produce product descriptions in seconds.

“Circana believes that as the use of AI evolves, the future will see AI automating more marketing, sales and supply chain decisions. We have just scratched the surface of what’s possible with AI and as we get better at optimising its usage, businesses will be able to rely more on AI to drive their innovation,” Leathwood said.

Circana is assisting many retail businesses to harness AI and explore its potential to transform marketing campaigns. Their offerings include Liquid Data Engage, a solution that addresses the unique challenges faced by retailers and integrates data assets to identify opportunities for growth.

“Some of the consumer and business trends from 2023 have carried over to this year, with a slightly different meaning. In 2023, the top driver for consumer spending was value. In 2024, while value is still a top priority, Australian shoppers are not just looking for the lowest cost but for more,” said Leathwood.

Circana was formerly known as IRI and The NPD Group.