Are food prices on the rise? Absolutely. Thanks to pandemic-related supply chain issues, tariffs on some imports and, of course, inflation, grocery prices have steadily climbed since 2020.
Many factors are at play right now, such as the war in Ukraine that has affected the country’s ability to export food — primarily wheat and corn — according to the USDA’s Foreign Agricultural Service. Also, droughts and wildfires in the Western U.S. led to lower-than-average crop yields from farms in that region, which drive up prices. While inflation appears to be slowing down, or at least growing less rapidly, as of September, shoppers are always looking for ways to save.
The New York Times reports that store brands, also called private label brands, are gaining more popularity as shoppers seek to stretch their dollar at the grocery store. The Times reported that store-brand chips from Casey’s General Stores, a convenience store chain in the Midwest, have seen stronger sales than those of name brands. The store responded by stocking more of its own chips in a variety of new flavors. This led to a boom this summer, with Casey’s brand making up a quarter of all bags of chips sold, eating into the sales of big brands like Frito-Lay, which is owned by PepsiCo.
Then, a Purdue University study about consumer buying habits was released, and it sparked even more questions about when and why shoppers reached for a store’s own brand vs. a brand name. What store-brand products will people grab, and which will they skip? And why? The psychology of consumer behavior has been a longstanding area of study, and grocery stores are one place where those effects are particularly obvious.
Yahoo Life spoke to study authors Joseph V. Balagtas, a professor in the department of agricultural economics and Elijah Bryant, a survey research analyst of agricultural Economics at Purdue University, as well as Jennifer Kaplan, professor of sustainable food systems at the Presidio Graduate School and head of sustainability at C16 Biosciences, for some insight about why we make the choices we do in the grocery aisles.
With store brands gaining popularity, what kinds of products are people actually buying?
Simply put, shoppers tend to grab staples from the store brands, preferring them over the brand names.
Balagtas and Bryant explain they saw this in their study results, with fruits and vegetables being standouts. “What we see in the responses to our Consumer Food Insights survey is that store brands are most popular for fresh fruits and vegetables, with around 66% choosing store brands over brand-name fresh fruits and vegetables,” they tell Yahoo Life.
But it’s not just produce. “Historically, consumers have been more inclined to purchase store- brand versions of staple food products,” Kaplan tells Yahoo Life. This includes items such as canned goods, including canned vegetables and soups; pantry staples, such as pasta, rice and flour; and nonperishable items, such as dry cereal and coffee, she says.
The reason is that these products are seen as bigger savings without losing value, she explains. “These products are viewed as cost-effective alternatives, and the potential for savings is a significant driver for their purchase,” Kaplan says.
She also notes that with costs seemingly rising everywhere, consumer demand for other types of products has been growing as well. “According to data from the Private Label Manufacturers Association (PLMA) and the market research company IRI, the following food categories experienced the most private label growth in 2022: bottled water, snacks and desserts like cookies, butter and butter alternatives, shortening and oils for baking and cooking and processed poultry,” Kaplan says.
Grocery store-brand sales have gone up significantly
Store-brand labeled food is a big source of store revenue, with private label food sales increasing significantly during the pandemic, reaching $135.5 billion in March 2022. These store-brand foods give grocery stores a bigger profit — and retailers love that.
“By providing private label options, stores can expand their market to cater to cost-conscious consumers to capture a more significant portion of their food budget,” says Kaplan.
It also allows markets to better control what’s on their shelves. “Private label options allow retailers to better withstand the impact of ingredient shortages and other disruptions to the food system supply chain, ensuring they have inventory to meet customer demand,” Kaplan says. “This proved to be especially significant during times of food scarcity.”
Which brand-name products do shoppers still prefer?
This seems to come down to specialized products that shoppers are loyal to and just think taste better or are perceived as being healthier. Think grabbing the Lesser Evil bag of popcorn vs. a generic or a fancy local cheese.
“Consumers tend to be more cautious and may avoid private label options when it comes to specialized food products,” Kaplan says. “This is particularly true for products where brand reputation and quality play a more significant role in their choice. Examples of these items may include premium health and wellness brands, artisanal cheeses and specialty or gourmet foods.”
It’s also about trust, even if the ingredient list is identical, says Kaplan. In other words, some people just have to have their Heinz ketchup.
“Some people continue to prefer brand-name products, even when the ingredients are the same,” Kaplan says. “This phenomenon is often driven by deep-rooted brand loyalty and the trust and familiarity associated with well-established brands. As a result, certain brand-name products, especially those ingrained in consumers' loyalty, may face less competition from store brands.”
Beverages, like the impossible to imitate Coca-Cola, are another area where brand names matter. “Brand-name products are most popular in the beverage aisle, with around 68% choosing brand names over store brand alternatives — even at a higher price point,” note Balagtas and Bryant.
Why do people choose store brand over brand-name products?
What tips the scale to move people toward purchasing a store brand? It all comes down to price, of course. Second to that, it’s preference.
“We asked consumers what they perceive to be the benefit of brand names: taste, ingredient quality, nutrition or food safety? Bottom line: Consumers’ choice of brand name over generic was correlated with their perception of taste, but not so much these other attributes,” explain Balagtas and Bryant.
In their study, approximately two-thirds of respondents chose brand-name beverages, regardless of premium, and about two-thirds of respondents chose the generic fruits and vegetables, regardless of premium. With snack foods, a majority chose brand names at a 15% premium, but if the price premium was raised by 30%, the majority chose the generic brand.
Although there’s still a perception that certain brands can’t be mimicked by a store brand, clearly, it’s about savings. Private label products often provide a more economical choice compared to brand-name alternatives. According to Nielsen IQ, the peak of inflation in October 2022 coincided with a significant increase in private label consumer packaged goods sales.
“Economic uncertainties and cost-consciousness drive consumers to opt for more affordable private label products,” says Kaplan. “In a practical sense, this financial benefit is the strongest driver of consumers choosing store brand items.”
Do brand-name products actually taste better?
That said, people don’t mind paying more for something they think tastes better or is better for them.
“When consumers choose brand names at a premium, we can infer that the brand names offer some value-added to consumers,” says Balagtas. “In the case of beverages, a majority of consumers told us that brand names in fact taste better and that the better taste is worth at least 15% or 30% premium to them.”
But do they actually taste better? That really comes down to the individual. Balagtas shares that he experiences this himself, saying, ”I can taste a difference between Coke and Pepsi and store-brand cola, but I don’t think one tastes better than the other so I’ll buy whatever is cheapest. But others have strong preferences for one brand or another, and in our survey, a majority told us that they’d pay as much as 30% more for their preferred, brand-name beverage.”