IT GOES without saying that the past year has seen a lot of major changes occur within the marketplace.
As could be expected, grocery manufacturers and marketers alike are finding the future more difficult to predict than it has been in the past. Some food trends may have suffered with the recession (anything premium-priced, e.g. organics or Fair Trade is more likely to be hit); and some have burgeoned (e.g. some wines have enjoyed increased supermarket sales as people opt to entertain at home, and baking staples have enjoyed good sales increases as home baking grows).
But it’s not just price-related trends that have fluctuated. Consider growing trends such as local-sourcing, home-grown vegetables, frugal chic, fortified foods and the anti-food-from- China backlash, and it’s harder still to predict the future.
Add the effects of a programme like ‘What’s in our Food’ and still more can change unexpectedly.
One of the biggest trends that concerns most is of course the growth of Private Label sales. It’s no secret that the growth has been very strong throughout the recession, the question this poses being “how sustainable will this growth be?”.
As grocery manufacturers and marketers continue to scrutinise their categories, the elephants in the room called Pams, Home Brand, Signature, Select and Budget loom large.
The good news is that recent data from my colleagues at Synovate Aztec confirms that the accelerated growth of Private Label during the recession has slowed to smaller growth levels akin to those recorded pre-recession.
So the big growth of the last 18 months won’t be maintained.
Bad news
The bad news is of course that we will undoubtedly continue to see the retailers push Private Label, so it’s unlikely that Private Label share is going to go backwards anytime soon.
As a market researcher I inevitably focus on the consumer in these situations. Neither I nor grocery manufacturers alike can do much to change our competitors, so the best we can do is seek to understand the consumer a little better.
Essentially, there are two schools of thought on this issue, the rational and the emotional.
Rationalists argue that if the quality is similar and the price lower, then why on earth would consumers buy more expensive branded items?
Rationalists point to surveys that show consumers are increasingly reading labels and comparing prices, making their purchase decisions on more quantitative information than brand alone.
But rationalist readers be warned - because rationality is a positive trait in western culture, survey respondents will tend to unconsciously or otherwise overclaim their logical behaviour and
rational thought processes. Hence surveys claiming that vast majorities of consumers are scrutinising their every purchase have to be taken with a grain of salt.
The emotionalists will point out that consumers (i.e. inconsistent, contradictory and often just plain silly people – like you and I) routinely make purchases that cannot withstand rational scrutiny. Hence, people buy new cars that depreciate the second they leave the car yard, women wear physically injurious shoes, people smoke and eat too much and exercise too little, buy bottled water, and use cars for short errands while worrying about climate change.
Not rational
The most complex machine in the world is the human brain, and trying to understand people is an exercise that goes back thousands of years and has used up trillions of dollars. Frankly people are NOT rational beings!
To add to the emotionalists’ argument, it’s worth noting that although they will differ on how to measure such things, market researchers around the world and in hundreds of companies all agree – consumers will spend more for brands that make them feel good about themselves, even when they acknowledge that there are cheaper alternatives that are equally as good.
Of course, there are a great many exceptions to the rule, because of the variable nature of both the grocery industry and people themselves. A perusal of some New Zealand online chat-rooms confirms this – there are very few who completely reject private label brands, and few who claim to buy everything possible from private label. Just as people vary in their emotional-rational balance, so too will consumers vacillate in their preference for Private Label or Big Brand. One key insight from the online chatter is that quality and taste remain of paramount importance, hence Private Labels’ strongest performance is in commoditised lines like flour or milk. Therefore, we can predict one trend with confidence– those who cannot prove why their branded products are genuinely better and worth the extra cost, will suffer the consequences.
