Inflation continues to push consumers to rethink their spending habits, creating a fickle environment for carriers trying to navigate the downturn.
Higher prices have meant consumers are shifting money from restaurants to groceries and cutting back on new products or even entire categories, according to an H1 2023 report by Morning Consult, “The State of Food & Beverage.”
According to the report, savings goals are driving consumer changes. “Consumers’ need to save money is a clear and present threat to adult beverage brands as drinkers cut back, trade down to less expensive options or cut out alcohol entirely,” Morning Consult said.
That consumer spending weighs heavily on carriers. “For dry van carriers, the strength of the American consumer is a crucial indicator of future freight demand,” DAT Freight & Analytics also noted in a June 19 blog post.
With capacity shedding the market, shippers are taking advantage of the current environment, getting substantial savings.
“The freight cycle remains clearly weak,” ACT Research said in a 2023 forecast published in May. But positive signs include imports starting to recover, the firm said.
Although the economy has shown more resilience than initially expected, broad economic conditions are soft, and a shallow recession is expected to materialize sometime during mid-year, according to ACT Research.
Industry projections point to rising demand
With an uptick in beverage purchases for hydration during the summer months and celebrations between Memorial Day and Labor Day, this time of the year is especially important.
Accordingly, C.H. Robinson VP of North American Surface Transportation Ronnie Davis suggests relief could happen this spring and summer in the beverage industry, which could help change the narrative on sluggish demand.
He said the seasonal uptick won’t be out of the norm year over year. “We think that’s going to be a nice movement in this very still recessionary time we’re having right now,” Davis told Transport Dive in a May 25 interview.
Overall, national dry van and reefer spot forecasts suggest an uptick in June, and DAT Chief of Analytics Ken Adamo said many smaller refrigerated carriers bank on profits during this time of the year due to a seasonal slowdown after July Fourth.
Expectations for consumer trends as price raises continue
Meanwhile, companies might be benefiting from raised prices, but businesses are also trying to not turn customers away altogether. Whether that happens remains to be seen, and the industry remains split on whether product prices will negatively affect demand, Deloitte noted in a 2023 outlook report.
“2022 set the record for higher consumer packaged goods (CPG) prices,” the report said. “Central banks are doing their best to fight inflation and prevent higher prices. Nonetheless, eight in 10 companies in our survey plan to raise their prices further in 2023.”
Despite the economic uncertainties, freight volumes have tended to surge during beverage season in good and bad economic environments, C.H. Robinson’s Davis also noted in an email to Transport Dive.
“The amplitude of increase is just not as extreme during times of economic uncertainty,” he said in the email. “Consumers may choose cheaper products or switch to private-label beverages. But they’re still thirsty.”