Consumers Continue to Fill Baskets With Store Brands

NEW YORK -- A new study by Deloitte LLP has found that store brand products are accounting for more space in shopper's baskets.

According to Deloitte's 2014 American Pantry Study, U.S. consumers are pushing their shopping carts past many national brands and feel little regret in doing so. The study looked at more than 375 brands across 30 product categories.

Notably, seven in 10 shoppers (71 percent) say they're spending less on food, beverage and household goods, but don't feel like they're sacrificing much. Only 31 percent of brands are considered a "must have" -- one that shoppers would buy whether on sale or not -- consistent with the last four years that Deloitte has conducted the survey.

"National brands are pressured on all sides, from persistent consumer frugality and low brand loyalty to rival and store brand competition," said Pat Conroy, vice chairman, Deloitte LLP and U.S. Consumer Products leader. "While consumers initially resented buying less-expensive products out of necessity a few years ago, they have changed their tune. They have shifted from a feeling of settling for lower-priced brands to settling in to store brands distinguished by high quality."

In addition, nearly nine in 10 (88 percent) respondents say they have found several store brands that are just as good as national brands and allow them to feel as though they are saving money without giving up anything.

Across 28 of the 30 consumer packaged goods (CPG) categories studied, Deloitte found that most consumers perceive store brand quality to be the same or better in most of them. Consumers find the highest private label quality in categories such as bottled water, tabletop disposable paper products, food storage, deli meats, condiments and salty snacks.

However, year after year, the study shows certain categories where consumers remain committed to their national brands and less likely to switch, even despite price increases, including beer, pet foods, soft drinks and coffee.

Four Consumer Groups

According to the study, 91 percent of consumers noted they have become more resourceful. Deloitte's analysis categorizes consumers into four groups: super savers (26 percent), sacrificers (19 percent), planners (23 percent) and spectators (32 percent).

• Super Savers: Super savers enjoy the hunt, and make a concentrated effort to use coupons and visit multiple stores.
• Sacrificers: Sacrificers are more likely than others to switch to store brands and only 16 percent describe themselves as brand loyal; however, these compromises are accompanied by feelings of resentment.
• Planners: Planners are most focused on resourceful pantry management and planning ahead to maximize their budgets. In addition, 60 percent describe themselves as "deal-seeking."
• Spectators: The least affected by economic conditions, spectators are more likely to buy higher-priced products by a brand they trust rather than cheaper or store alternatives, with convenience carrying more importance than price when it comes to selecting a retailer.

Focused Approach

Deloitte's study found a narrow set of brands winning the loyalty game primarily on trust, but also on price and product positioning.

The top 10 percent of must-have brands differed significantly from the bottom 10 percent of brands -- most notably with a 27-percentage point rating difference as a product that tastes or works better.  Additionally, the majority (68 percent) of the top 10 percent of must-have brands have a more focused price positioning and outperform those that are relatively scattered.

"Traditional thinking that targets consumers at multiple price points with good, better or best offerings often misses the mark," Conroy said. "Given the bifurcation of consumers between higher and lower income levels, brands should instead address different shoppers' ability and willingness to spend by moving to an OK, better and excellent brand portfolio."

According to Deloitte, trust means more to consumers than other brand qualities, though health and convenience also earn points with consumers. Nearly eight in 10 (78 percent) consumers indicate they have purchased a higher-priced, newly-launched product in the past year. Among them, 54 percent selected a more expensive product because it was a brand they trust, followed by a healthier option (38 percent) and a company they trust (30 percent). Nearly three in 10 (28 percent) skipped a lower-cost alternative for one that was easy to prepare or use.

"CPG brands are suffering from a crisis of the similar, where consumers don't see a lot of difference between branded products on the shelf," Conroy explained. "Rather than exit a crowded category, brands should consider new growth opportunities where categories are beginning to blur -- such as extending their products into new meal times, form factors and store aisles, or making a move to support from-scratch cooking or prepared meals."

The 2014 American Pantry Study was commissioned by Deloitte and conducted online by an independent research company in January. The survey polled a sample of 4,025 consumers and has a margin of error of plus or minus two percentage points.