Dive Brief:
- As inflation and higher prices have impacted consumers, 73% of people have acquired a taste for private label brands and plan to keep buying them even as the economy improves, according to a study from Attest provided exclusively in an early look to Food Dive. Just 9% said they will not stick with private label options.
- Nine out of 10 shoppers say they are bargain hunting when grocery shopping. A total of 41% are visiting multiple stores to find the best deals, and cheaper pricing is four times more likely to attract shoppers to a store than special offers and promotions.
- Many retailers have stepped up the quality and selection of their private label offerings in recent years, hoping to boost the perception of store brands as a good value with higher quality.
Dive Insight:
As consumers isolated in their homes during the early days of the pandemic, name-brand CPGs were clear winners on grocery store shelves. The strong well-known brands brought comfort to consumers who were preparing for uncertain times, and Big Food made up for years of slow growth.
But post-pandemic headaches — including supply chain issues, poor growing seasons and animal-based illnesses — resulting in higher prices have changed the game. As this Attest survey of 2,000 U.S. residents conducted in January shows, cost savings at the grocery store have become vitally important to consumers.
Attest’s study shows a growing trend toward private label.
In June, the Food Industry Association (FMI) released a report that said 41% of shoppers bought more private label items during last year’s spring months than before the pandemic. Inflation for a variety of commodities — including rent, fuel and other consumer goods, in addition to food at home — has only gotten steeper in the last six months, so it makes sense that more consumers have looked to less expensive store brands.
While higher prices from inflation likely led consumers to buy more private label items, a concentrated effort to improve their quality also could be a factor. In 2021, a survey from FMI found 91% of food retailers and manufacturers planned to significantly or moderately ramp up their private label efforts in the next two years. In addition, 58% of companies said they were adding new offerings focused on innovation.
For their part, private label manufacturers and retailers have worked together to improve the store brands available to consumers.
Private label used to be basic versions of national brand products, but retailers are now honing in on some of the attributes more premium products use to draw consumers. Non-GMO certifications, premium packaging and functional ingredients are helping to turn consumers’ heads. Different levels of premiumization — from basic store-branded products to more upscale ones — also offer private label consumers a choice.
Big Food companies should take heed of these kinds of studies and work to make up lost ground. Supply chain difficulties and inflation led to price hikes from just about every major food company during 2022, but consumers may be quickly reaching their limits of how much more they are willing to pay for name-brand items. In their most recent earnings reports, Unilever and Nestlé noticed that higher prices on the shelves led to fewer sales.
Some other big food companies, including PepsiCo and Kraft Heinz, have decided to stop raising prices to spur demand. But if consumers like the quality, variety and premium touches of today’s private label products, it may not be enough to get them to switch back when inflationary forces weaken.
via https://www.aiupnow.com
Megan Poinski, Khareem Sudlow
