Source: Tyler Durden
U.S. consumers’ loyalty to brand names at supermarkets is quickly evolving as they try new grocery products amid snarled supply chains and high inflation.
Top food companies like Kraft Heinz Co. and Kellogg Co. are at dire risk of losing market share as supermarket operators grapple with shortages and fill empty store shelves with lower-cost brands, industry insiders told WSJ.
American households are money-conscious more than ever as inflation hits four-decade highs and takes a bite out of their monthly spending budgets. Some consumers have broken ranks of years and years of brand loyalty only to buy whatever is on the shelf, often generic brands.
“We see people make more choices on items because they are available,” said Tony Sarsam, chief executive officer of grocery chain SpartanNash Co.
Sarsam said SpartanNash had reduced shelf space for food products from major brands because of shortages, allowing it to expand room for local brands, which had a more dependable supply.
Private-label consulting company Daymon Worldwide Inc. conducted a survey between May 2020 and August 2021 and found 70% of U.S. consumers bought new or tried different brands in a post-pandemic world. This means brand loyalty could be collapsing as consumers buy what is available and the cheapest.
Even though consumers generally buy familiar brands, industry analysts show high inflation and belt-tightening by households have forced many to find a better deal to make their dollars go further, even if that means buying generic brands.
84.51 LLC, a data analysis business of supermarket giant Kroger Co., also confirms consumers are switching to low-cost brands.
Kroger’s 84.51 said that 90% of consumers are willing to try another brand if their primary brand is unavailable.
WSJ spoke with one consumer in Fort Lauderdale who has been, like many other Americans, trying out new brands because the ones they wanted were out of stock or because prices were too high.
The days of supermarkets carrying only top-shelf brands could be over as shortages and inflation open new opportunities for food companies that can deliver low-cost products.
The shift in shopping behavior is a significant warning for major brands as supermarkets are desperately trying to fill shelf space amid shortages. People are more inclined to try new brands, and many seek low-cost ones.
“There hasn’t been a lot of customer resistance,” said Jonathan Weis, chief executive of Weis Markets Inc., referring to consumers trying generic brands. “They’d rather get orange juice than no orange juice,” he added.