Marketers beware: Grocery shoppers are as stingy as ever, making fewer store trips and spending less, while warming to private labels and aggressively seeking deals and discounts, according to a new report by Acosta Sales & Marketing, a leading sales, marketing and merchandising company.
Burdened by high gas prices and sluggish economic trends, only 23% of shoppers expect to spend more this year compared with 2010, while 13% will cut their budgets and 63% will spend about the same, according to Acosta, which conducts a survey twice a year of a panel of 8,500 U.S. households. Shoppers have already cut their spending, with the average monthly grocery bill dropping to $279 per household in February. That's down from $298 a year earlier, including food and non-food items, according to the survey, called "The Why Behind the Buy." The drop is significant, considering that marketers this year have increased prices in many categories to contend with rising commodity costs.
"While the recession might be over, the recovery hasn't really begun," said Ramin Eivaz, chief marketing officer for Acosta, which represents 60% of the top consumer-packaged-goods brands. "Shoppers are very, very careful and watchful and they are not shifting their smart, value-seeking behavior because the uncertainty is still quite high."
For big ad spenders, the most disturbing trend might be the continued strength of store brands. The survey found 54% of shoppers saying they buy "a lot" of store brands to save money, while 41% said about half of all purchases are store brands. And there are signs that private-label loyalties are here to stay. Nearly 30% of shoppers said they plan to stick with store brands even if their financial situation improves. At the same time, younger generations seem more accepting of the products, with 52% of those age 18 to 44 saying private label is "a better value" than branded products, compared with 46% of shoppers 45-54 and 47% of those 55 to 64, according to the survey.
Private-label sales jumped 1.7% in the year ended May 14 and now command 17.6% of all store purchases, up from 16.9% two years ago, according to Nielsen. Meantime, sales of branded goods dropped 1% in the last year.
The shift puts even more pressure on advertisers to communicate why their brands are superior. Or as Acosta says in the report, marketers need to "expand the gap in shoppers' minds between their products and store brands" or risk losing even more business.
Categories feeling the most heat from private label include butter and margarine, where branded products dropped from 71.2% of sales two years ago to 67.9%; fresh meat, 84.5% to 78%; cough and cold remedies, 77.3% to 72.9%; and pain remedies, 74.7% to 65.3%, according to Nielsen.
Store brands are even moving aggressively into categories where they have not traditionally done well, such as beer, where a host of chains are trying out new private labels. Overall, big beer brands continue to struggle. Year-to-date domestic shipments were down 1.4% as of April, Beer Business Daily recently reported, citing data from the Beer Institute trade group. "The trifecta of a very slow economic recovery of employment, rainy weather and high fuel prices have really put the hurt on domestic premium beer sales," Beer Business Daily reported.
Across all grocery categories, Acosta found that the average shopper begins reducing grocery trips once gas hits $3.70 per gallon. On Thursday, the national average gas price was $3.73, which is 22 cents cheaper than a month ago, but still $1.02 more than a year ago, according to AAA's Daily Fuel Gauge Report.
As they pay more at the pump and consolidate trips, shoppers are often times choosing a supercenter over a supermarket, drug store or convenience store. And shoppers say they will stick with the same habits even when the economy improves. "Shoppers will no longer be 'trying out' supercenters -- they'll be supercenter shoppers," Acosta says in the report. "The marketplace continues to change as almost 30% are now doing most of their grocery shopping in a supercenter."
But when luring shoppers, old tactics still work. While digital is gaining ground -- 40% of shoppers said they use online tools before entering a store -- old-fashioned circulars are still used in some way by 84% of shoppers, with 51% of those surveyed saying they clip coupons form them, and 28% saying they make their shopping list based on circulars, according to the survey. Marketers "should continue to make being featured in the store circular a priority," Acosta says in the report. "New items and smaller brands may have a better chance of being noticed in the circular than by the shopper walking down the aisle."