Climate Change & Natural Capital (AO) | Impacts of Iran conflict on the food value chain - webinar summary

Research evidence excerpt

Climate Change & Natural Capital (AO) | Impacts of Iran conflict on the food value chain - webinar summary

higher costs through fuel and household energy bills. Consumer confidence in Europe has already

deteriorated, mirroring concerns about their future financial situation, inflation, energy bills and the economic outlook.

As food and energy absorb more household budgets, consumers are expected to trade down and trade out. This could imply

moving from brands to private label, shifting from mainstream supermarkets to discounters, choosing cheaper proteins and

reducing out-of-home food spending.

Although wages have outpaced inflation in 2024 and 2025, allowing consumers to recover much of the purchasing power lost in

2022–23, shopping behaviour has not reverted to pre-crisis patterns. Consumers have therefore become more price-conscious,

which may limit the scope for further trading down in the event of another inflationary shock.

At the same time, consumers are also more demanding of transparency and value for money. They are less willing to accept

unclear price increases or tactics such as shrinkflation, where product sizes are reduced while prices remain unchanged. This puts

greater pressure on suppliers and retailers to justify price changes clearly and demonstrate tangible value to consumers.

Retail price negotiations remain highly fragmented across Europe. France is one of the most rigid markets, with a formal annual

negotiation window that typically runs from late year into the first quarter, while Germany is more flexible and allows

negotiations throughout the year. In most European markets, the key negotiation period is concentrated around October to

January, making this the critical window for passing through higher input costs.

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