More consumers purchased private brands in first quarter, according to IRI

In its recent study, “Early View 2018,” Chicago-based market researcher IRI reports that sales of consumer packaged goods (CPG) got off to a slow start in the the first quarter of 2018, despite stable inflation, low unemployment and the recent tax cuts. But IRI predicts that sales will improve in coming months. In the report, IRI notes that 85 percent of consumers purchased private brands in the first quarter compared to 81 percent in the first quarter of 2017.

“The Tax Cut and Jobs Act was passed at the end of 2017, and the expectation was that extra income from lower withholdings would spur spending,” said Susan Viamari, vice president of Thought Leadership for IRI, in a press release. “Only 19 percent of consumers we surveyed said they expect to spend more as a result of the tax cut, so the CPG industry should not expect to be seeing a major boost.”

During the first quarter, Viamari said the CPG industry saw low-level growth, with price increases driving dollar sales growth and edibles faring slightly better than the industry as a whole.

“The good news is that economic expectations for the remainder of the year are positive,” she added. “We found that consumers want food and beverage solutions that will help them advance their nutritional goals, and they are willing to pay for the extra benefits. CPG marketers can really drive growth of premium products if they truly understand what is most important to consumers.”

The U.S. economic outlook is healthy for the remainder of 2018, according to IRI. Key indicators point to gross domestic product (GDP) growth surpassing 5 percent for the first time in five years, and the unemployment rate declining to 3.8 percent by year’s end. For the CPG industry, premium products offer opportunity to drive basket and margin growth, IRI noted, reporting that 25 percent of consumers say they expect to buy more premium products in the next six months.

“So know your customers inside and out, and tailor your offerings to meet their needs,” Viamari advised. “By personalizing your products and messaging, you will hit the right note with consumers, encouraging them to open their wallets in support of your brands.”

Regarding store brands, IRI found that 80 percent of consumers making more than $100,000 annually bought private brands in the first quarter. Ninety percent of consumers making $35,000 or less annually purchased private brands. Younger millennials were the largest consumer group (95 percent) purchasing private brands.