Grocery prices prompt ‘trading down’ - LimaOhio.com

2022-10-01 21:12:09 By : Ms. Rebecca Lee

A customer shops for eggs in a Kroger grocery store on August 15, 2022, in Houston, Texas. Egg prices steadily climb in the U.S. as inflation continues impacting grocery stores nationwide.

Brandon Bell/Getty Images/TNS

More grocery shoppers are turning to store brands and frozen food as inflation forces cost-cutting and a drive to reduce personal food waste, recent surveys show.

A new Deloitte poll found more than a third of shoppers — and nearly half of rural consumers — are regularly “trading down” from name brands to less expensive private label alternatives. Private label is industry parlance for store brands, such as Target’s Good & Gather, Walmart’s Great Value and Whole Foods’ 365.

“As price has increased in importance, people are making significant tradeoffs,” said Barb Renner, vice chair and U.S. leader of Consumer Products for Deloitte. “People like to feel comfortable they can meet their family needs.”

Another consumer survey from Bernstein, an investment research firm, showed 70% of shoppers are at least choosing store brands more often than they were a year ago, and many said higher prices on energy and goods outside groceries are driving those decisions.

“This is in stark contrast to a year ago when only 18% of respondents claimed to be purchasing more store brands, likely due to stimulus payments and pandemic-related savings in discretionary spending,” Bernstein analyst Alexia Howard wrote. “The switch to private label is happening across all income brackets.”

Jarred and canned goods, frozen vegetables and pasta are seeing the biggest private label gains, Bernstein’s survey showed.

Food waste has become increasingly important as consumers stretch budgets and try to use all they buy.

“The focus on not throwing out food has been an interesting shift,” Renner said, and it has given frozen food a new shine.

A report from the American Frozen Food Institute last week found, “79% of consumers believe frozen foods are cost-effective,” even as prices on frozen options have increased faster than food overall.

As of August, grocery prices have risen 13.5% over the past year. Even amid higher prices, the Deloitte and Bernstein surveys both found consumers are still demanding health and wellness benefits from their food.

“Only 13% of respondents claim to not be reading nutritional labels, while the majority of individuals noted at least one health concern they aim to tackle with their eating habits,” Howard wrote.

Renner said trends in health foods are moving toward “food as medicine,” which half of Deloitte’s respondents said they are willing to spend more on.

Post Holdings chief executive Robert Vitale said the consumer pivot to private label is “here, stable and potentially building some momentum.”

That should mean a boost for Minnesota-based Post Consumer Brands, the nation’s third-largest cereal maker.

“We are by far the largest provider of private label ready-to-eat cereal,” Vitale told investors in August. “It feels like that’s an opportunity from a consumer trade-down perspective and a customer perspective. So it feels pretty encouraging right now.”

General Mills and Hormel stand to miss out on sales as a result of more private label buying. Both have seen overall volumes fall over the past year — though less than anticipated given price increases on their products.

General Mills CEO Jeff Harmening told investors last week that price sensitivity has been “more favorable to us than we had anticipated in the current environment, particularly as consumers have traded away-from-home eating to more at-home eating.”

The state’s biggest frozen food companies, including Schwan’s and Bellisio Foods, may be benefiting from “above-average performance for frozen dinners/entrees, breakfast items, snacks and appetizers,” the American Frozen Food Institute writes.

One grocery category remains nearly unmoved: snacks.

“Snack companies [and especially healthy snack companies] will continue to perform better over time, while companies that are still anchored in heavily-processed meal-based categories in the center of the store will remain under pressure,” Howard wrote.