Kenya’s affluent households are increasingly abandoning premium brands across various products due to the soaring cost of living. A survey conducted by Ipsos Kenya reveals that 43% of households with a consolidated monthly income of over Sh300,000 are refraining from purchasing certain items. Of these households, 30% are buying such items less frequently, while 26% are opting for less expensive alternatives that offer similar utility. This trend, known as de-premiumisation, is attributed to the financial constraints faced by Kenyan consumers amidst rising living costs.
Retailers across the country are witnessing a shift in consumer behavior, with price becoming a crucial factor influencing purchasing decisions. As a result, premium brands are losing prominence, and consumers are seeking more affordable options. Manufacturers are feeling the impact as premium products with higher profit margins are being abandoned in favor of volume-driven alternatives. Consumers are displaying less brand loyalty and are becoming more price-sensitive, actively seeking reduced prices or settling for less-preferred substitutes.
The de-premiumisation trend has been observed across various sectors, leading to a decline in demand for premium goods. Manufacturers have experienced decreased sales as consumers prioritize basic necessities. Coping mechanisms among upper-middle and high-income earners include purchasing smaller quantities and dispensers, which were previously associated with lower-income households. Bulk shopping and seeking deals or discounts are less popular coping strategies among this income category.
The retail sector, particularly 24-hour outlets, is also feeling the impact as consumer wallets come under increasing strain. Retailers operating round-the-clock are forced to optimize their operations and manage costs more effectively to combat eroding margins. The Ipsos Kenya survey indicates that consumers aged 35 and above prioritize price comparison, while younger age brackets opt to purchase items less frequently as coping mechanisms for the high cost of living.
With the Finance Act 2023 taking effect on July 1, households anticipate even tougher economic conditions due to the measures outlined in the Act. The introduction of new tax rates and the uncapped Housing Levy deduction is expected to further reduce disposable income for upper-middle and high-income Kenyans. As a result, brand loyalty is diminishing, and manufacturers are hoping to retain customers through convenience offerings and by emphasizing value and quality.
The Ipsos Kenya survey, conducted between March and April 2023, collected responses from over 1,000 participants, with a nearly equal gender split and a range of age groups represented.
