National brands could regain market share as store brands lose appeal, Deloitte study says

By Elizabeth Crawford contact

- Last updated on GMT

National brands could regain market share as store brands lose appeal

Related tags: Consumers, Store brands, Late-2000s recession, High-fructose corn syrup

As the U.S. economy continues to recover, less expensive store brands are starting to lose their appeal – creating a long-awaited opportunity for national brands to regain market share that they lost during the great recession, new consumer research suggests. 

The number of consumers who are willing to try store brands fell 8 percentage points to 65% in 2015 – the lowest since 2010, according to Deloitte’s annual American Pantry Study of more than 354 brands in 34 categories.

Likewise, the number of consumers who view store brands as a sacrifice rose 10 percentage points to 43%, according to the study.

Consumers shifting attitudes about stores brands, which they prized during the recession for their value, mirrors their changing perceptions about the U.S. economy, the study revealed. It noted that 58% of consumers currently believe the U.S. is in a recession – down from 79% in 2014. There was also a slight drop in the percentage of consumers who say they are “getting a lot more precise in what I buy,”​ and those who say the American economy has “fundamentally changed”​ and a penny-pinching is “the new normal.”

“This combination of skepticism and improving optimism could be the starting point for a major shift in purchasing behavior,”​ according to the study.  “There is hope for CPG companies that are able to shift their brand and product portfolio to the attributes that matter most to the consumer: healthy, innovative, convenient and customized,”​ it adds.

Many consumers are willing to pay a premium of up to 10% for products – including national brands – that offer these attributes, the survey found.

While paying more for healthy products has been an established trend for several years, what consumers consider healthy – and therefore are willing to pay more for – is evolving, the research found.

Today’s consumers “prefer pure, unadulterated food low in preservatives, sodium, artificial ingredients and high fructose corn syrup,”​ and “are less drawn to attributes that used to be hot, such as low-fat, high-fiber and high-protein,”​ the study found.

It also found consumers say they consider health and sustainability most when buying yogurt, juice, cereal and deli items. They are much less likely to value these attributes in gum, soda, beer, cookies and frozen meals, the study notes.

Consumers also are 25% more likely to pay a premium for a new innovative product, 19% more willing to pay more for personalized products and 27% more likely to shell out more for convenience, the study found.

Attracting consumers at the shelf and online

National brands also can better take advantage of consumers’ shifting values by understanding how and when they make shopping decisions, the study notes.

More than half of consumers make decisions at the shelf and these account for 34% of units purchased in 2015 – up from 48% and 29% respectively in 2014, the study found.

The biggest driver of impulse purchases was price, which 89% of shoppers cited as their motivation for an unplanned purchase.  But price isn’t the only reason.

The study also found 81% of shoppers bought unplanned items because they remembered the item when they saw it; 63% said they bought items because they wanted to try something new; 52% said it was because they saw a new product from a trusted brand and 45% said they bought unplanned items that make it easier to prepare a meal.

“Focusing more effort on non-price triggers might seem risk in the short-term, but has the potential to improve long-term brand health, loyalty and margins,” ​the study advises.

It also advises brand managers to more aggressively reach out to consumers digitally, given that is now a majority of consumers use digital technology on their path to purchase.

The study found 55% of consumers use digital tools to research products, including 48% who compare product prices, 37% who make shopping lists or plan meals and 29% who try items based on recommendations, ratings and reviews on social media.

Brands can take advantage of this by offering promotions online, given 36% of consumers visit brand websites or follow brands on social media for discounts, the study said. Digital promotions also are a good way to gather personal information about shoppers, 53% of whom are willing to swap this information for a personalized promotion.

Companies that thoughtfully and successfully employee these touchstones to reach consumers “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,”​ Barb Renner, vice chairman, Deloitte LLP and U.S. Consumer Products leader, concluded in a release.

Related topics: R&D

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