U.S. shoppers have money and are buying what’s in stock. But, big brands and ad campaigns are no longer enough to command consumers’ loyalty in grocery stores. As prices increase, shoppers switch brands and make hard choices that leave a lot of brands sitting on the shelf.
My wife needed to buy some instant coffee for her morning caffeine fix, and since she didn’t have a coffeemaker, she decided to get some instant coffee. Her choice was a brand from Mexico at $.99 or Starbucks for $4.99. Even though she likes Starbucks, she went with the less expensive brand. This is happening all over the country.
While some brands have been reporting record profits due to price increases, shoppers’ willingness to switch brands could shift the balance of power inside grocery stores. Industry executives said that big food companies like Kraft Heinz Co. and Kellogg Co. risk losing market share to competitors and store brands that are more readily able to fill in empty spots in store aisles. While grappling with shortages, Supermarket operators said the situation gives them more leverage with powerful brands and flexibility to test newer, often lower-cost products.
Grocery store buyers are trimming the number of items they offer in response to some brands’ inability to meet demand and slower sales.
About 70% of U.S. shoppers said they had purchased a new or different brand than they had pre-pandemic, according to a survey conducted from May 2020 to August 2021 by private-label consulting company Daymon Worldwide Inc. More than 90% of consumers say they will buy another brand or item if their preferred choice wasn’t available, according to a recent survey conducted by Kroger’s 84.51.
According to market research firm IRI, as consumers try less familiar names, brand loyalty for companies with supply challenges is declining. Brands with low availability, or in-stock rates of between 72% and 85%, have lost 0.7 percentage points of share of wallet on average, the firm said. Share of wallet, which measures brand loyalty, shows whether companies gain or lose buyers.
Some marketers think that consumers stick to brands they know out of convenience and buy more items from names they are familiar with, but shoppers are inclined to switch brands when belt-tightening if they can find a better deal. Kellogg said in February that some of its cereal brands lost ground in supermarkets and that it expects to gain cereal market share in North America in the second half of the year when it can get more products back on shelves. Kellogg said it gained market share last year in salty snacks and crackers.
Some retailers said the shift in shopping behavior makes them less accountable to specific brands and helps them focus on the top sellers in each section.
“Any leverage we can find with those bigger brands helps,” said Mark Griffin, president of B&R Stores Inc., where American Beauty and Barilla pasta brands have lost shelf space and share to a brand imported from Italy. B&R has learned that it doesn’t need to carry every variety from all brands and is rejecting about 75% of new items compared with 30% before the pandemic, Mr. Griffin said.
It will be interesting to see brands trying to hold onto market share as they increase prices. Some offer smaller package contents, but consumers are aware of those moves and punish brands on social media.