Two in three Australians say their groceries cost more than they did a year ago, and as a result, they are changing how they shop. Price sensitivity, brand trust, and digital influence are reshaping the fast-moving consumer goods (FMCG) sector.
At an Inside FMCG webinar hosted by Stephanie Chadwick, industry leaders unpacked what this means for retailers and suppliers: The guests were Sam Gilding, chief revenue officer at product intelligence platform Vypr; Maurice Melis, an experienced CEO and consultant in the FMCG industry; and Karen Mitchell, FMCG executive and supplier consultant.
A shift from preference to price
Vypr works with brands like Starbucks, M&S, and FrieslandCampina, helping them test product names, packaging, and price points with consumers in under 48 hours.
Gilding said research shows just how deeply the cost-of-living crisis has reshaped Australian shopping habits.
“The cost-of-living crisis has fundamentally transformed the Australian shopping landscape. The impact has been massive,” he said. Almost half of all shoppers now rank “cheap price” as their top consideration when buying, and seven in 10 keep their weekly grocery bill under $200. “They have got really creative about how they’re stretching their budgets: Nine out of 10 shoppers are actively hunting for promotions.”
This new pragmatism is reshaping retail’s competitive dynamics. Shoppers no longer see private-label goods as the fallback choice. “It’s the smart choice for the majority of shoppers,” said Gilding. Over the past three years, 39 per cent of Australians have improved their view of store brands, and 57 per cent still hold them in positive regard.
For retailers, that means own-brand products are not only accepted but increasingly preferred. For suppliers, it means a squeeze on mid-market branded products that once thrived between value and premium tiers.
The retailer–supplier squeeze
Melis highlighted how rising costs cascade through the supply chain. “The consequence of this is that we are seeing major retailers pursue growth volume through strong price investment, communication and value. Both Woolworths and Coles have invested in reducing shelf prices of over 700 products, and there are likely more to come.”
But those cuts come at a cost. “Of course, this investment doesn’t come free, so both retailers are undertaking simplification programs or cost-out programs to help invest in price and shore up their bottom lines. However, the retailers are also relying on suppliers to help support this price investment at a time when suppliers also need to invest to achieve their own volume targets. This puts a lot of pressure on those suppliers’ bottom lines.”
Mitchell advocated that agility is now a competitive weapon. “That may mean leaning heavily into lower margin products, but the key is managing this transition creatively and avoiding eroding overall margin; it may include developing targeted entry-level ranges that meet genuine consumer needs without making them feel like they’re compromising on quality.”
She described this balancing act as offering affordability without sacrificing trust. At the same time, retailers and brands can encourage customers to “trade up” occasionally, whether for premium treats or compelling promotions. Loyalty programs, targeted discounts, and meal-deal bundles can boost repeat purchases while supporting margin stability.
Simplifying the aisle
Melis said the shift is also driving range rationalisation. “It can really help to deliver a simplified shopping experience. It really helps with functions like on-shelf availability, and it also helps lower costs through reduced store labour, more efficient distribution, and a reduced amount of admin, all of which drive margin gains in those retailers.”
But this simplification poses risks to brands, especially those in the squeezed middle. “From a brand perspective, that retailer strategy can be somewhat confronting, and brands really need to stay relevant, particularly in this marketplace,” said Melis. Mid-tier products must now either consolidate their range, modernise branding to appeal to a broader audience, or invest in innovation to reignite consumer excitement.
Tools like Vypr, which rapidly test consumer reactions to new concepts, give brands a faster path to validating these adjustments.
Three big opportunities
Despite the strain, Gilding sees three clear opportunities for brands and retailers.
1. Own brands with quality at the right price.
Ninety-six per cent of Australians now see store brands as important to their basket. “There’s clear potential here for retailers who really nail quality at the right price,” he said. The challenge is positioning products as both affordable and valuable, avoiding the trap of “cheap equals low quality.”
2. The rise of the planned shop.
Half of consumers now plan their grocery shop in advance, compared to just 14 per cent who shop spontaneously. “They are now less likely to browse; they are going into the store knowing what they want.”
That means digital marketing and pre-shop influence matter more than ever. “Around 56 per cent of shoppers now recall social media, ads and other advertising before they go into stores, so getting onto the pre-shop list through smart digital marketing is really important,” Gilding said.
3. Communicating clear value.
With 65 per cent of shoppers seeking visible value for money, and 90 per cent buying on promotion, it’s not enough to offer low prices. “It’s about showing exactly what shoppers get for their money and making the most of that,” said Gilding.
Melis noted that this shift is changing retailer strategies too, with everyday low prices gradually replacing high–low promotions. But that creates its own communication challenge. “Consumers don’t understand how your retail price used to be $10, and you would promote it at $7 or even $6 frequently, and now you’re putting on every day low price for $8, ‘so you are ripping us off for that $2 difference’.”
The bigger picture
Beneath the pricing mechanics and brand strategies, the bigger story is about trust. Shoppers want assurance that their money is well spent. They want affordability without compromise, promotions that feel authentic, and a shopping experience that reflects their needs in a cost-sensitive environment.
For brands and retailers, the challenge is not just about cutting prices but about understanding what consumers value and meeting those expectations consistently. As Mitchell put it, the key is to “take consumers on a journey through the tiering,” balancing affordability with moments of delight that foster long-term loyalty.
That’s where tools like Vypr’s rapid testing and the data it generates can help. Retailers that listen closely to customers and act quickly will be the ones best positioned to win share in a market where every dollar – and every perception of value – counts.
- Watch the recorded webinar for inspiration on how brands and retailers can unlock growth by working collaboratively, using data as a shared tool for faster, smarter decision-making. Learn how to win loyalty and what it takes to make a great partnership in the FMCG industry.
