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Retailers across the U.S. have noticed a palpable shift in consumer spending habits during the recent months of record inflation and said shoppers who once would not bat an eye to fork over more for a named-brand product, are now opting for store-brand merchandise.
Matthew Farrell, the chief executive of Church & Dwight, an American manufacturing company based out of New Jersey, said in an interview with The Financial Times that he noticed in the last quarter that shoppers started to leave the premium brands on the shelf in their search for more affordable items.
He called cat litter his “canary in a coal mine” moment. Customers once splurged for Arm & Hammer Platinum Clump & Seal cat litter, but now look to the cheaper items.
“We would expect that to worsen,” he said.
The U.S.’s overall inflation rate sits at just above 8 percent, the highest in more than 40 years. The Consumer Price Index jumped 8.6 percent from May 2021 to May 2022.
Food prices for home consumption jumped nearly 12 percent, including a 32 percent increase for staples like eggs and a 16.6 percent jump in poultry. Gas is also hovering at about $5 a gallon.
Mark Zandi, chief economist with Moody’s Analytics, told CNN that the average home in the U.S. is laying out about $460 more each month to purchase the same food.
About 85 percent of those surveyed by Forbes Adviser said they’ve made changes to their shopping habits to absorb increased prices.
Of those who responded to the survey, about 27 percent said their budgets are “at the limit,” while about 26 percent admitted that they are spending too much. Less than 10 percent told the magazine that they had “a lot” of space left in their budget.
Kroger, the supermarket giant, said in a call with analysts last week that customers are beginning to “aggressively” buy its brands. The report pointed out that discount retailers and the makers of store brands could benefit from this seismic shift to more affordable items.
“Rising inflation has consumers rethinking their shopping and eating habits,” Rodney McMullen, Kroger’s CEO, said in the call. “We are seeing different shopping behaviors based on how individual customers are experiencing the current inflationary environment.”
We have reported that major retailers in the U.S. are also being impacted by inflationary pressure. (See “MAJOR RETAILERS TAKE A DRUBBING.”) Walmart and Target have both cut their profit outlooks in 2022 due to rising costs for food and fuel.
TRENDS FORECAST: Americans will continue to seek out more affordable items where they can. The Food Industry Association said 41 percent of shoppers surveyed this spring said they bought more store brands than before the pandemic.
“When asked about 14 product attributes, shoppers identified an average of four reasons for choosing private brand products. Clearly shoppers’ interest in private brand products extends beyond just price,” Doug Baker, the association’s vice president, said in a statement obtained by GroceryDrive.com.
Companies will accommodate this new shift in consumer sentiment and bring to market new products that will hurt national brands. Companies like Whole Foods and Kroger already have a strong footing in this area, but more stores have ambitious plans to sell their products directly to customers.
Save Mart, a popular West Coast grocer, said it will roll out “hundreds of private items this year.
Overall, America continues on its economic, physical, spiritual and emotional decline. As we have forecast, the 20th century was the American century but the 21st will be China’s… since the business of America is War and the business of China is business.