Are Food Prices on the Rise? The Impact of Supply Chain Issues, Tariffs, and Inflation
It’s no secret that food prices have been steadily climbing since 2020. A combination of pandemic-related supply chain issues, tariffs on imports, and inflation has contributed to this rise. Several factors are currently at play, including the war in Ukraine, which has affected the country’s ability to export food, particularly wheat and corn. Droughts and wildfires in the Western U.S. have also led to lower crop yields, further driving up prices.
Despite inflation showing signs of slowing down, shoppers are always on the lookout for ways to save money. According to The New York Times, store brands, also known as private label brands, have gained popularity as consumers seek to stretch their dollar at the grocery store. Casey’s General Stores, a convenience store chain in the Midwest, saw stronger sales of its store-brand chips compared to name brands. In response, Casey’s stocked more of its own chips in various new flavors, leading to a surge in sales this summer. As a result, Casey’s brand accounted for a quarter of all chip sales, impacting big brands like Frito-Lay, owned by PepsiCo.
Understanding Consumer Behavior: Why Do Shoppers Choose Store Brands?
A Purdue University study on consumer buying habits shed light on the factors that influence shoppers’ choices between store brands and brand names. The psychology of consumer behavior is particularly noticeable in grocery stores.
According to Joseph V. Balagtas and Elijah Bryant, authors of the Purdue study, shoppers tend to gravitate towards store brands for staple products. The study found that around 66% of respondents preferred store-brand fresh fruits and vegetables over brand-name options. This trend extends beyond produce to include staple food products like canned goods, pantry staples, and nonperishable items. Consumers view these products as cost-effective alternatives that offer savings without compromising quality.
In addition to staples, other food categories have seen private label growth, including bottled water, snacks and desserts, butter and butter alternatives, baking and cooking oils, and processed poultry.
The Rise of Grocery Store-Brand Sales
Private label food sales have seen a significant increase, reaching $135.5 billion in March 2022. Grocery stores benefit from this rise in store-brand sales, as it boosts their revenue.
Store-brand options allow retailers to cater to cost-conscious consumers and capture a larger portion of their food budget. It also provides greater control over inventory and helps mitigate the impact of ingredient shortages and disruptions in the food supply chain.
Brand Names vs. Store Brands: Which Products Do Shoppers Prefer?
While store brands have gained popularity, certain brand-name products still hold appeal among shoppers. Specialized food products, where brand reputation and quality play a significant role, tend to be preferred by consumers. Examples include premium health and wellness brands, artisanal cheeses, and specialty or gourmet foods. Brand loyalty and familiarity often drive consumer preference for these products.
Brand names also matter in the beverage category, with approximately 68% of shoppers choosing brand names over store brand alternatives, even at a higher price point.
What Influences Shoppers’ Choice Between Store Brands and Brand Names?
The decision to purchase store brands or brand-name products primarily comes down to price and preference. Consumers prioritize taste when it comes to brand-name beverages, while they opt for store-brand fruits and vegetables regardless of premium. Snack foods show a preference for brand names at a 15% premium, but consumers switch to generic brands when the price premium goes up by 30%.
While certain brands may offer added value in terms of taste, it ultimately depends on individual preferences. Some consumers are willing to pay more for their preferred brand-name beverage, while others can’t discern a significant difference in taste and opt for the cheapest option.
However, economic uncertainties and cost-consciousness drive many consumers to choose more affordable store-brand products. Private label items often offer a more economical choice compared to brand-name alternatives, particularly during times of inflation.
So, while food prices continue to rise, shoppers will continue to make choices based on their budget, taste preferences, and perceptions of value.
