Last week, as Tesco reported its interim results to the market, CEO Ken Murphy made a remark that resonated across the consumer-facing industries: “What we saw during the cost-of-living crisis is that a lot of customers changed their behaviours — and many of those changes have stuck.”
It’s a simple observation, but one that captures a much broader shift. Even as inflation cools and macroeconomic indicators improve, many of the behaviours adopted during the cost-of-living crisis — from value-seeking to delayed gratification — are proving durable. They are no longer temporary coping strategies. In many cases, they’ve become the new baseline.
The instinct might be to wait for a return to pre-crisis spending patterns — for confidence to rebound and discretionary spending to rise again. But what if the return never comes? What if this is not just a phase, but a reset?
“What we saw during the cost-of-living crisis is that a lot of customers changed their behaviours — and many of those changes have stuck.”
Ken Murphy — CEO, Tesco
Back when our lives turned upside down in 2020, MBS’s report The Phoenixes and Bastions of the Consumer Sector highlighted how the most resilient businesses weren’t just reactive — they adapted with pace. From strengthening supply chains to fast-tracking digitisation, these companies reshaped operations to match evolving consumer needs. Those shifts turned out to be critical in the recovery phase.
Five years on, another wave of disruption has been taking shape. It’s less visible, less sudden, but no less significant. This time the pressure doesn’t come from a single event, but from a series of converging challenges: persistent inflation, stagnant wages, political uncertainty, and rising interest rates. And once again, consumers have been adapting.
McKinsey’s latest consumer sentiment research confirms that inflation remains a dominant concern. Shoppers are prioritising essentials, trading down where they can, and embracing private-label alternatives in record numbers. But that doesn’t mean people have stopped spending altogether — they’re just doing it more selectively.
“Inflation remains the top concern for European consumers, but its impact has softened on average compared to last year”
ConsumerWise, McKinsey
This new frugality is intentional. Consumers are not just cutting back; they are re-evaluating. They are looking harder at where their money goes — and what a brand stands for. As Bain & Company’s research into sustainable consumption notes, despite ESG backlash dominating headlines, consumers do still want to make better choices — environmentally, ethically, financially — but are looking for clarity and confidence. In today’s market, value isn’t just about price. It’s about trust, simplicity, and transparency.
These shifts aren’t happening in a vacuum. They’re emerging against the backdrop of a broader sense of instability — political, social, and economic. In analysis published by MBS earlier this year — Expecting the Unexpected — where we looked at how boards are responding to heightened political volatility, we observed how times of political volatility often push businesses to reassess not just operations, but purpose. That’s especially relevant now.
Rising polarisation, growing inequality, and declining institutional trust are shaping how people see — and judge — brands. A purchase today is more than a transaction. It can be a small act of alignment: with values, identity, or simply a sense of fairness. Companies are being held to higher standards, even as consumer budgets become tighter.
“Consumers aren’t just cutting back — they’re choosing differently, more carefully, and with longer memories.”
This recalibration is being felt in the investment landscape too. In our recent white paper on private equity’s outlook for the consumer sector, we noted how investment appetite remains — but with increasing selectivity. Funds are actively favouring businesses with strong fundamentals, brand clarity, and a clear plan for navigating margin pressure. There’s a focus on operational resilience, pricing power; brand equity alone is no longer enough.
In short: capital is still flowing into consumer-facing businesses — but only into those that demonstrate an ability to navigate this new environment with focus and flexibility.
That caution is mirrored in BCG’s June 2025 report on European sentiment, which found that despite a deep pessimism about national economies, consumers haven’t stopped spending — they’re just doing it more carefully. Brands perceived as transparent, fair, and consistent are continuing to outperform.
“European consumers are even more discouraged about the political situation than about the economy, with 57% expressing pessimism…These concerns increasingly drive consumer decisions.”
BCG
While there’s no one-size-fits-all response, several strategic themes are beginning to emerge across the consumer sectors— each reflecting how brands and businesses are interpreting this moment:
Value is no longer just about price.
Consumers are thinking holistically — evaluating quality, trust, values and experience. Brands that help people feel confident in their choices, not just save money, are gaining traction. There’s also a shift in how value is communicated. It’s no longer enough to compete on price alone — especially when consumers are factoring in quality, sustainability, and service. The brands that are resonating most are those offering more than affordability — they offer confidence.
Small luxuries still matter.
Even in frugal times, there is appetite for indulgence — in smaller, more manageable forms. Formats, packaging and messaging that make modest spend feel meaningful are resonating.
Trust and transparency are differentiators.
In a low-trust climate, clarity matters. Brands that explain pricing, sourcing and sustainability claims — and are prepared to be held to account — are standing out.
There’s no such thing as an average customer.
With widening income divides and regional variation, uniform strategies are becoming less effective. Businesses that segment more precisely and localise intelligently will be better placed to meet demand.
Growth capital is cautious but interested.
Investors still believe in the long-term value of strong consumer brands — but they are now looking for deeper evidence of resilience, innovation, and alignment with evolving consumer priorities.
A Sector at a Crossroads
For many businesses, the temptation is to wait — for the macro picture to stabilise, for inflation to ease, for a return to “normal” spending. But the signals suggest that the consumer mindset has changed in ways that are likely to persist.
Life as we knew it pre-Covid is ancient history today; in fact the Covid-response playbook no longer applies either. Habits once considered temporary now define how and where people spend. And in this new landscape, brands that combine adaptability with authenticity — and resilience with relevance — are best placed to thrive.
As we wrote in 2020: in every disruption, there are phoenixes and there are bastions. The former adapt; the latter hold firm and risk being left behind. Once again, the challenge is to decide which to be.
