There’s a battle brewing over shelf space in America’s grocery stores.
As The Wall Street Journal (WSJ) reported Wednesday (Aug. 14), this conflict is being driven by a shrinking amount of real estate in grocery aisles as stores begin to include more of their own lower-cost products.
Supermarkets are reducing both the number of items they stock and their overall physical space, Steve Zurek, a vice president at consumer research firm NIQ, told the WSJ, adding that private-label brands — aka store brands — are taking up more room as consumers cut back.
“This has put a tremendous amount of stress on shelves,” he said.
While food companies had in the past been able to hike prices to offset rising costs, American consumers have grown more diligent about reducing their grocery bills, the report notes. That’s made supermarkets more selective, stocking their shelves in a way to court these shoppers.
And food companies are now investing in new products and making sure packaging and prices appeal to shoppers, while also keeping shelf space and location in mind, the WSJ adds.
“It’s obviously critical for our business,” said Dave Marberger, chief financial officer for Conagra Brands, maker of products like Hunt’s ketchup and Healthy Choice frozen meals. “But there’s no guarantee that you have that shelf space forever. The business has to perform.”
PYMNTS examined consumers’ changing grocery tastes earlier this week in a conversation with Bobby Watts, head of the AD Retail media arm of grocery giant Ahold Delhaize USA.
“They’re not as brand loyal as they used to be. … I think it’s [because of] two things. I definitely think that economic pressures are causing consumers to make choices … based on price or promotion or value,” Watts said.
“But we also see … the younger generation has grown up in a world where everything is instantaneous, and things are moving at such a fast pace, that they’re willing now to experiment more and test different brands, whereas the other demographics may not be as apt to do so.”
Research by PYMNTS Intelligence shows consumers are making changes to their grocery purchasing habits in response to cost pressures, with 36% of shoppers trading down from their go-to grocery products to cheaper versions in response to inflation.
“In fact, grocery shoppers tend to show considerably stronger affinity toward merchants than products,” that report said. “PYMNTS Intelligence research shows that 53% of grocery customers say that they are more loyal to merchants than products, and only 35% are more loyal to products than merchants.”
