Well-known brands and flashy advertising campaigns are no longer enough to dominate the loyalty of American consumers in grocery stores, said retail executives. As inflation spreads and stretched supply chains leave gaps on the shelves, shoppers become increasingly changeable, with availability and price deciding what to put in their shopping carts.
Shoppers’ new desire to change brands can change the balance of power in grocery stores. Large food companies such as Kraft Heinz Co. and Kellogg Co. risk losing market share to competitors and store brands that are easier to fill in vacancies in store aisles, said industry executives. Supermarket operators, while struggling with shortages, said the situation gives them more influence with big brands and the flexibility to try newer, often cheaper products.
“We see people making more choices when it comes to goods because they are available,” said Tony Sarsam, CEO of the food chain SpartanNash Co. In Grand Rapids, the Mich.-based company’s supermarket aisles, Mr. Sarsam, Tropicana orange juice lost shares in Coca-Cola Co.’s Simply Orange in recent months, which has been easier for SpartanNash to store, while Tyson Foods Inc. similarly lost shares in frozen breaded chicken to Conagra Brands Inc.’s banquet meals .
Mr. Sarsam said he and his team are now examining the amount of groceries the company sells, and have recently trimmed the number of items it offers in cake, biscuit and salty snack sections in response to some brands’ inability to meet demand and slower sales. SpartanNash sometimes gives more shelf space to local brands, which can better keep products in stock.
Tyson said it is working hard to meet the high demand for its products. Coca-Cola, Conagra and private equity firm PAI Partners, which owns Tropicana, declined to comment.
About 70% of American shoppers said they had bought a new or different brand than they had pre-pandemic, according to a survey conducted from May 2020 to August 2021 by the private consulting firm Daymon Worldwide Inc.
When consumers try lesser-known names, brand loyalty decreases for companies with supply-side issues, according to market research firm IRI. Brands with low availability, or stock prices of between 72% and 85%, have lost 0.7 percentage points of the wallet share on average, the company said. Percentage of wallet, which measures brand loyalty, shows whether companies win or lose buyers.
Consumers often stick to brands they feel comfortable with and buy more goods from names they are familiar with, said industry analysts.
At 84.51 LLC, a data analytics firm from supermarket giant Kroger Co., Vice President of Commercial Insights Barbara Connors said that brand change was driven by extreme shortcomings and inventory build-ups, and that shoppers were increasingly switching to cheaper brands, including those on sale.
Production restrictions cost some food giants in grocery stores. Kraft Heinz said in February that it lost share in certain supermarket categories as the company struggled to keep pace with demand. Kraft Heinz had no further comments.
Kellogg said in February that some of its grain brands were losing ground in supermarkets and that they expect to take market shares for grain in North America during the second half of the year when they can get more products back on the shelves. Kellogg said it took market share last year in salty snacks and biscuits.
“We will see market shares recover,” Steven Cahillane, CEO of Kellogg, said in a results interview last month. “We first focus on our biggest brands.”
Some food companies said they see opportunities as more shoppers change brands. Geoff Tanner, chief commercial and marketing officer at JM Smucker Co., said that the manufacturer of Jif peanut butter and Folger’s coffee has benefited from being able to meet demand more consistently compared to competitors.
“There’s more to get if you can surpass,” Tanner said. About two-thirds of Smucker’s product portfolio is increasing its market share today compared to one-third before the pandemic, he said, and the company is increasing advertising.
More than 90% of consumers say they will buy another brand or product if their preferred choice was not available, according to a recent survey by Krogers 84.51.
Leandra McGregor, a web developer who lives near Fort Lauderdale, Florida, said she has been trying out new brands in recent months while shopping for food, whether certain foods are out of stock or rising in price.
She said she liked a new organic peanut butter brand she tried recently when the food shelves were bare. Ms. McGregor said she also bought branded salad mixes at Publix Super Markets Inc. instead of the more expensive organicgirl products she usually gets.
“I like to taste different things,” she said.
In the past, US supermarkets have been reluctant to have lesser-known brands, cautious about losing sales to competitors and accustomed to offering customers as many choices as possible.
When it comes to foods like cereals and ice cream, many consumers still prefer specific brands, says Kristen Hanson, who oversees the retail trade at Tops Markets LLC. Despite month-long supply challenges, Gatorade still accounts for the majority of sales in the sports drink section and consumers return to the brand when supply improves, she said.
Some retailers said that the change in shopping behavior allows them to become less dependent on specific brands and helps them focus on the top sellers in each section.
“Every leverage point we can find with the bigger brands helps,” says Mark Griffin, CEO of B&R Stores Inc., where American Beauty and Barilla pasta brands have lost shelf space and parts to a brand imported from Italy. B&R has learned that it does not have to carry all varieties from all brands and rejects about 75% of new items compared to 30% before the pandemic, said Mr. Griffin.
Other retailers said they are currently filling holes with lesser-known brands and do not plan to offer them in the long run.
“There has not been much customer resistance. They would rather have orange juice than no orange juice “, says Jonathan Weis, CEO of Weis Markets Inc.
Download the app to get 14 days of unlimited access to Mint Premium for free!