Home Merchant cash advance Consumers are turning to lower-priced grocery brands

Consumers are turning to lower-priced grocery brands

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As grocery prices continue to soar, consumers are adapting their behaviors. Rather than sticking with their favorite food and drink brands as they become more expensive, many grocers are replacing their regular items with less expensive alternatives.

Research from the May U.S. edition of PYMNTS’ Digital Economy Payments Study, “Digital Economy Payments: How Consumers Pay in the Digital World,” found that average consumer spending for their grocery purchases fell between March and April. The drop came even as food prices themselves continued to rise, indicating that consumers were likely making the choice to switch to cheaper brands or products.

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For context, increases in grocery prices are outstripping inflation as a whole. The Consumer Price Index for All Urban Consumers (CPI-U), released by the U.S. Bureau of Labor Statistics (BLS) on Friday June 10, revealed that door-to-door food prices (i.e. say groceries) were up 11.9% year-over-year in May. , while prices for all items increased by 8.6%.

Certainly, the great grocers have noticed such a change. Take, for example, Walmart, the world’s largest food retailer. In a call with analysts in mid-May to discuss the company’s first-quarter results, Brett Biggs, Walmart’s executive vice president and chief financial officer, noted that those concerns translated into “an increase in penetration of private grocery brands”, consumers choosing lower prices over trusted brands. John Furner, president and CEO of the company’s US operations, added that this change is particularly pronounced in the protein and dairy categories.

See more : Walmart sees shift to private label groceries amid rapid food inflation

Competitor Target noted a similar trend in its latest earnings call. The day after Walmart’s call, Target executive vice president and chief financial officer Michael Fiddelke noted a tendency for consumers to choose lower prices over brand recognition, noting “the strength of own brands in food and beverages.

Read more: Target transforms stores to meet online grocery demand

Price not only drives consumers’ product and brand choices, but also their choice of merchant, according to data from PYMNTS’ Decoding Customer Affinity: The Customer Loyalty to Merchants Survey 2022. The report, created in collaboration with Toshiba Global Commerce Solutions, found that 37% of grocery shoppers cite price as the most influential factor when selecting a merchant to buy from, a higher share than any another consideration.

See more : 35% of consumers will switch grocery stores and pharmacies for better digital features

While some predict that inflationary challenges will continue to pressure grocers to find pricing solutions indefinitely well into the future, grocery giant Albertsons Companies expects these challenges to ease later in the year. as the supply chain recovers.

“Product availability continues to be a challenge, continues to be a bit of a mole,” company CEO Vivek Sankaran told analysts on a call in April to discuss the company’s results. company in the fourth quarter of 2021. “We imagine that product availability will continue to be a challenge for most of this calendar year, perhaps in the middle of this year, at least, and perhaps it will begin to get some relief in the fall, so we also think there might be more supply, and that supply might bring down some of the inflation.

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NEW PYMNTS DATA: THE CUSTOM PURCHASING EXPERIENCE STUDY – MAY 2022

About: PYMNTS’ survey of 2,094 consumers for The Tailored Shopping Experience report, a collaboration with Elastic Path, shows where merchants are succeeding and where they need to up their game to deliver a personalized shopping experience.