Study: CPG Brands Losing Consumer Loyalty

NEW YORK — Brand loyalty isn’t what it used to be. For the fifth year in a row, Deloitte’s annual American Pantry Study found that America’s national food, beverage and household brands are struggling to regain favor in the hearts and minds of U.S. consumers.

The study analyzed more than 354 brands across 34 product categories. Almost three in four consumer packaged goods (CPG) categories, 73 percent, showed an overall decline in their brands’ “must-have” status, meaning shoppers would purchase them whether or not they were on sale.

“This is a critical moment for consumer product companies,” said Barb Renner, vice chairman of Deloitte LLP and U.S. consumer products leader. “While the majority of consumers say they are committed to sustained frugality year after year, our findings point to early signs that they may finally be responding to a belated but increasingly strong economic recovery.

"It creates tremendous opportunities and risks for companies in this sector," she added, "given households’ lack of commitment to national brands brought on by years of stretching dollars to the limit. Brands that get things right can use the economy’s momentum to regain their place on consumers’ shelves, but those that move too slowly could very well be left behind.”

While previous years of economic stagnation fueled consumers’ interest in store brands, this year’s study reveals the trend may be reversing as recession-weary consumers loosen their purse strings. This year’s study showed a drop in store brands’ appeal. The number of consumers who view store brands as a sacrifice (43 percent) jumped 10 percentage points from last year's study, while fewer consumers (65 percent) indicated they are more open to trying store brand products, an 8-point decline.

Moreover, roughly one-quarter (25 percent) of consumers indicate they are willing to pay a premium of 10 percent or more for a product that is new or innovative, and one-third (33 percent) will do so for a craft version of food or beverages, according to Deloitte.

Understanding the drivers of at-the-shelf purchases can help brands improve their promotional strategies and better connect with consumers, according to the study.

Roughly half of consumers (51 percent) make purchase decisions at the shelf, and while discounts and promotions are important, they are not the only deciding factor. When asked what triggers an impulse buy, 89 percent of shoppers cite discounted prices, but many also indicate they bought an item because they remembered it when they spotted it in the store (81 percent), and nearly two-thirds (63 percent) say they did so because they wanted to try a new product.

“Although price remains the single biggest factor influencing at-the-shelf purchases, many other aspects can also catch shoppers’ attention,” said Rich Nanda, principal, Deloitte Consulting LLP and co-author of the study. “CPG companies should step back and consider challenging the status quo, rather than immediately resorting to discounts and promotions. Focusing more effort on non-price related triggers might seem risky in the short-term, but may improve long-term brand health, loyalty and margins.”

Health and wellness attributes also rank high on consumers’ shopping lists. Nearly nine in 10 consumers (86 percent) prefer convenient options that are also healthy, and 25 percent are willing to pay a 10-percent premium or more for healthier versions of a product. Further, 41 percent chose the product at the shelf because the label addressed their health and wellness concerns.

For more information about the 2015 American Pantry Study, including in-depth survey findings, visit http://www.deloitte.com/us/AmericanPantry15.