While consumers opt for more affordable private label products — sustainability and personal beliefs continue to weigh in on purchasing decisions.
Inflation and economic headwinds continue to shrink consumer spending, particularly in the food and beverage industry. The trend toward premium offerings is beginning to falter as consumers start to scale back and trade down to adjust to continually rising food prices. So where does sustainability fall on the consumer’s purchasing scale? Is it still as valuable as it once was?
Private Label Resilience
Despite record spending in the food and beverage category, consumers have resorted to reducing their purchases in response to inflation, resulting in an 8% year-over-year decline in real spending. In addition, buyers are also turning to store brands to save money, with sales of private label products growing by 11.3% in 2022, outpacing national brands.
This shift toward private label brands is not limited to lower-income consumers, as middle- and upper-income shoppers also opt for these products to save money and focus on value. Private label market share has increased significantly for items showing the highest inflation, including eggs, salad dressings and oils, and beverages.
Food businesses that have invested in premium and natural products have initially seen success but are now feeling the pressure of rising costs. A survey this year found that only a scant 22% of consumers plan to stay loyal to products they trust regardless of price. The rest say they’ll seek out better value wherever they can find it.
To truly maximize market share, however, store brands also must consider sustainability. Mounting research shows sustainability drives purchasing decisions at every price point, with 79% of consumers saying they would switch brands in favor of a more sustainable option.
Sustainability Still Matters
While consumers opt for more affordable private label products — sustainability and personal beliefs continue to weigh in on purchasing decisions.
Consumers' increasing preference for affordable private label products is influenced by their concern for sustainability and personal beliefs. To address these environmental concerns, brands are actively exploring various approaches to communicate their mitigation efforts, such as adopting environmentally friendly packaging, utilizing natural ingredients, optimizing their use of raw materials, and enhancing production efficiency. Advancements in agricultural processes, including regenerative vertical farming, also playing a significant role in bringing sustainable ingredients closer to the end consumers.
If the rise of inflation has shown us anything, it’s that in tight times consumers revert back to trusted, reliable private label brands that don’t break the bank. This provides store brands with an opportunity to build loyalty and market share by checking consumer’s moral and financial boxes.
SOURCES
USDA, Economic Research Service using U.S Department of Labor, Bureau of Labor Statistics, Consumer Price Index Data
https://www.askattest.com/our-research/2023-us-food-beverage-trends?_ga=2.114633344.622591375.1678716155-7886126.1678716155
https://info.mirakl.com/us-consumer-survey-january-2023?utm_source=Marketing&utm_medium=Third+Party&utm_campaign=WW+Website+Downloads+Consumer+Survey+Report+2nd+Edition+January+2023&utm_content=
