Q&A: 84.51°'s Outlook on Private Label, Consumer Trends in 2023
In 2022, inflation was a key factor in consumer decisions. Many Americans shifted towards private label products in attempts to save money at the grocery store.
With the New Year around the corner, Barbara Connors, vice president of Strategy and Acceleration at 84.51°, Kroger's retail insights firm, sat down with Store Brands to discuss how 2023 might be different when it comes to consumer trends and how retailers can plan accordingly.
SB: What were some of the key takeaways from 2022 as far as consumer trends? What surprised you about how consumers spent their money?
Connors: This year, we saw inflation become the dominant stressor for consumers, creating new constraints and influencing behavior among shoppers across age and income level. While it should not be surprising, one important learning from this year was just the breadth of levers that shoppers could pull spend their money differently and fulfill needs on tighter budgets.
Throughout the year, we saw numerous examples of ways in which shoppers exercised creativity and savviness to stretch their budget. When meat prices began to rise at the beginning of the year, we saw a variety of responses – from buying different cuts of meat, to trying new recipes that would require less meat, and even trying protein alternatives.
As price increases spread across categories, consumers began looking for deals and coupons more often, cutting out non-essentials and buying certain categories less frequently. It is important to note that while these behaviors were seen a macro level, each consumer has a unique set of constraints, definition of ‘essential,’ and prioritization of category needs.
SB: What trends specific to private label stuck out to you in 2022?
Connors: Inflation trends influenced the willingness and appetite for shoppers to trade to lower cost brands and private label offerings this year. As of November, half of shoppers we surveyed indicated that they have switched to a lower cost brand more often in response to grocery store price increases. Shelf stable foods and household cleaning are two specific examples of categories which have seen higher demand for and switching toward private label.
As we find ourselves now in holiday mode, it has also been interesting to see the role that brands do – and sometimes do not – play in holiday traditions. When we asked customers what attributes are more important when doing holiday grocery shopping compared to normal shopping, the percent of shoppers who rated “price” was 3-times as high as the percent who rated “brand” as important.
SB: Looking ahead to 2023, do you expect these trends to continue? Do you foresee private label continuing to grow even if inflation begins to ease in the new year?
Connors: We survey consumers each month to keep a pulse on attitudes, preferences and motivations. This year, we have consistently asked each month about the level of concern over Inflation, and it has consistently been above 65% since March. Given the persistence and pervasiveness of this concern, I expect the shopping habits that emerged this year to save and stretch dollars to continue into 2023.
The likelihood of private label marketers retaining shoppers they gained this year even as inflation subsides will be influenced by the actions they take. First, sustained purchase intent will be dependent on whether these products deliver the quality and benefits that shoppers want long-term. Second, just as national brand marketers know, you cannot take brand loyalty for granted. It must be nurtured. It will be important for private label brands to deliver ongoing value, communication and loyalty rewards to stay in the consideration set and incentivize continued purchases.
SB: How specifically should retailers plan for 2023?
Connors: Retailers should expect three trends to continue into 2023.
- At-home food consumption: Consumers have latched on to the many benefits that come from cooking and eating at home, including the ability to increase confidence in the kitchen, create quality meals for less money, lead healthier lifestyles, and connect with loved ones through food. This means elevated demand for groceries will continue, and retailers and brands have sizable opportunity to capitalize on.
- Prioritization of price and value: The impacts of inflation will continue into the next year. Retailers and brands should plan for shoppers to continue to make choices around both how they shop and what they put in their baskets. This will lead to continued brand switching and trial of new habits.
- Desire for holistic health and wellness: Definitions of health and wellness are constantly evolving as consumer priorities shift. The pandemic and disruption over the past several years have had significant impacts on this, elevating shopper priorities around sustainable health, immunity, mental health and self-care. Retailers and brands should expect increased demand for products that help consumers deliver on these needs.
SB: What types of strategies should retailers look at when promoting private brands into the new year?
Connors:
- Clearly communicate the your unique benefits to customers. At a time when shoppers are willing to switch brands, marketers have a unique opportunity to drive trial. Amplify promotions with data-driven media that provides awareness and education to shoppers at the same time.
- Design a promotion strategy that grows your entire category. Private label and national brands both have a role to play in meeting needs across a spectrum of shoppers and driving brand loyalty.
- Focus on the customer and continuing to meet their evolving needs. This should influence not only the promotion strategy, but also your upstream innovation strategy, ensuring you bring to market products that fulfill the benefits today’s shoppers are seeking.