A study of more than 354 brands across 34 product categories has some disturbing news for the nation's big food, beverage and household brands: Roughly 73% of consumer packaged goods (CPG) categories show an overall decline in their brands’ “must-have” status -- meaning that shoppers would purchase whether on sale or not.
That doesn't necessarily mean smooth sailing for the other guys. The Deloitte annual "American Pantry" study also showed a drop in store brands’ appeal, improved consumer perceptions of the economy, and shoppers’ willingness to pay a premium for attributes such as health and convenience. This could signal a turning point that is set to further disrupt the CPG industry after years of consumer caution.
“This is a critical moment for consumer product companies,” said Barb Renner, vice chairman, Deloitte LLP and US 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, given households’ lack of commitment to national brands brought on by years of stretching dollars to the limit,” she noted, adding, “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.”
Reversal of fortune?
While previous years of economic stagnation fueled consumers’ interest in store brands, this year’s study revealed that trend may be reversing as recession-weary consumers loosen their purse strings. The number of consumers who view store brands as a sacrifice (43%) jumped 10%, while fewer consumers (65%) indicate they are more open to trying store branded products, an eight% point decline.
Moreover, roughly 25% of consumers indicate they are willing to pay 10% or more for a product that is new or innovative, and 33% will do so for a craft version of food or beverages.
According to the study, more than half (55%) of consumers use digital tools to research products -- up 10% from last year, and ahead of the number who do so to compare prices (48%, which remained flat compared with last year.
Additionally, 37% use devices to make shopping lists or meal plans. These behaviors signal multiple points to interact with people along the path to purchase outside of traditional discounts, from building today’s list to planning next week’s dinner.
Price not the main driver
Roughly half (51%) of consumers 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% of shoppers cite discounted prices, but many also indicate that they bought an item because they remembered it when they spotted it in the store (81%), and nearly two-thirds (63%) 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%) prefer convenient options that are also healthy, and 25% are willing to pay a 10% premium or more for healthier versions of a product. Further, 41% chose the product at the shelf because the label addressed their health and wellness concerns.