1. Cheap drinks There has been a years-long trend in Australia of drinking less, but better quality, alcohol. That has started to change as consumers search for cheap drinks. Takeaway coffee sales plunge as fuel and living costs dent Australian spending. Is the economy next? Read more The ASX-listed alcohol packaging company Orora has detected a global shift toward cheaper spirits since the start of the Iran war. The volume of sales is also less than they had previously forecast due to diminishing customer confidence. Steven Fanner, the executive director at Spirits & Cocktails Australia, says Australians are “trading down” due to rising living costs. “They are getting something that’s a little bit cheaper, or opting for lower alcohol content, not necessarily as a responsibility measure but more because of cost,” Fanner says. The consumer trend is making it difficult for businesses that would ordinarily increase their prices to offset rising costs such as freight and fuel. “The question for businesses is how do you contain the price of products for the consumer because they don’t have any more money to spend, even if the cost of producing the product and getting it to market is going up,” Fanner says. Similar pressures are being felt by cafes and restaurants grappling with rising costs and financially strained customers, many of whom are cutting back on takeaway coffees and eating out.
2. Healthcare bypass The ASX was trading near record highs shortly before investors lost confidence that there was a clean exit strategy for the US-Israel war on Iran that could normalise the oil trade. While many stocks have weathered the subsequent bout of market weakness, the Australian headquartered medical device company Cochlear lost more than 40% of its market value in a single trading session on Wednesday. The company downgraded its profit outlook after global demand for its cochlear implants, designed to help people with hearing loss, weakened amid deteriorating consumer sentiment. Sign up for the Breaking News Australia email It told shareholders that poor sentiment “appears to be affecting discretionary healthcare decisions” as more prospective patients are unable to afford treatment, especially in the US. Analysts at Morningstar said Cochlear was facing long-term headwinds with adults “deprioritising implants”.
3. Bedding anxiety The deterioration in consumer confidence has been rapid, with many households already paying more on their mortgages before rising petrol prices took hold in March. The closely watched Westpac-Melbourne Institute consumer sentiment index shows anxiety over jobs has reached levels not seen since the pandemic. Households have responded by forgoing purchases of furniture, bedding and home appliances. Over the past two months, shares in furniture retailer Nick Scali have fallen about 20%, Harvey Norman is down more than 25% and homeware stockist Adairs has dropped by more than 30%. Richard Hemming, the editor at Under The Radar Report, says retail is “at the forefront of your discretionary dollar”. “People don’t like war, it’s a confidence killer,” Hemming says. “You’ve got a lot of headwinds at the moment. The environment is one of consumer constraint, and retail is at the front of that.” There are some brighter spots in retail, with Scentre Group reporting strong foot traffic at its Westfield centres, suggesting Australians are still enjoying shopping outings.