More than a third of shoppers plan to continue to buy the same private label foods that they currently purchase even though a drop in gas prices to as low as $2 per gallon means consumers are saving $200 million a day compared to last year, and therefore, have more money to spend on higher priced national brands, according to an online survey of 1,003 consumers conducted in late December by Daymon Worldwide Custom Shopper Insights team.
In addition, the survey respondents said they would use the savings to buy private brand products in new categories.
The news gets worse for national brands: An additional 22% of respondents said they would experiment with buying store brand products in new categories for the first time. Another 14% said they are actively seeking new private brand products to try.
These findings go against the conventional hypothesis that when consumers have more money in their pockets, they will revert to national brands, Janet Oak, Daymon Worldwide’s head of Global Advisory and Custom Shopper insights, told FoodNavigator-USA.
She explained that many consumers are not abandoning private label because they want to direct the savings to other priorities. For example, 41% of survey respondents said they would use the money to pay bills and 34% said they would increase their contributions to their savings accounts.
Consumers also are sticking with private label foods because retailers have improved the quality of their offerings, decreasing consumers’ perceived tradeoff for value, she said.
Promote now for growth
Retailers can take advantage of consumers’ interest in trying new private label products and their extra infusion of cash by making store brand products easier to find through multiple facings and strategic shelving, Oak said. She also recommended that stores “let consumers know about their products through in-store promotions and advertising in circulars.”
Sampling foods in the store and doing head-to-head taste tests between private label and national brands also can help consumers overcome hesitancy to buy store brands based on quality concerns, Oak said.
Retailers also can tear a page from national brands’ playbook and promote foods by describing on packaging where the food was made, where the ingredients were sourced, its health benefits and other talking points, Oak said. She added that currently many private label packs are basic and have plenty of space for sharing information that engages consumers.
Expand into new categories
Increased consumer spending inspired by cost-savings at the pump also creates an opportunity for retailers to expand their private brand offerings into new categories, given the survey results that suggest consumers want to branch out, Oak said.
She notes the largest potential for growth for retail brands are in the snack and soda categories, where national brands traditionally outspend retailers to the point that competition is not feasible.
Millennials also offer a substantial growth opportunity for private label products, Oak said.
She explained: “Millennials are more willing to try private brands because they have less money in their pockets and are more price sensitive, but also realize national brands aren’t everything,” Oak said. They also are not yet set in their ways and are interested in experimenting.
That said, consumers across all generations prize authenticity, so as retailers expand their offerings they must remain true to their banner, Oak said.
They also need to act fast. Oak said: “The time to act is now. Gas prices won’t remain low forever,” and when they go back up consumers will have less money to spend on new products.