Grocers Woo Persuadable Customers With Private-Label Deals

As grocers seek higher margins and more shopper loyalty, many are turning to private label.

PYMNTS research reveals that, while many shoppers have already switched to the lowest-priced brands, and while some will not trade down from their favorites no matter how good the deals get, a plurality of consumers are willing to make the shift if offered the right deal.

Research from the latest edition of PYMNTS’ Consumer Inflation Sentiment study, “Consumer Inflation Sentiment: The False Appeal of Deal-Chasing Consumers,” which draws from a February survey of more than 2,100 U.S. consumers, identifies a group of grocery shoppers, the “persuadables,” who seek a balance between deal-seeking and brand loyalty. This group, representing 39% of consumers, stands in contrast to the 17% that remain loyal to their favorite brands and the 44% that are always seeking out discounts and special offers.

“Historically, the reasons why someone may continue to be brand loyal just may not hold anymore because people are being forced due to financial constraints to make tradeoffs that they wouldn’t want to make,” Barbara Connors, vice president of commercial insights at 84.51°, the marketing insights subsidiary of grocery giant Kroger, told PYMNTS in an interview.

In fact, the PYMNTS study found that two-thirds of shoppers considered prices and discounts when deciding where to make their most recent grocery purchase.

Indeed, many grocers have been expanding their private-label offerings and their deal-targeting capabilities in an effort to reach those persuadables. For instance, multinational grocery giant Ahold Delhaize has been using its digital platforms to drive adoption of its store-brand products.

“There are three areas, in particular, we’ve excelled at in 2022. First, deepening our relationship with our customers by optimizing our digital engagement and loyalty programs,” CEO Frans Muller told analysts on a call last month. “Our brands are interacting with 30 million active users in new and innovative ways.”

So too is Kroger focusing on its private-label offerings, launching new products and marketing its brands to shoppers.

“The Our Brands portfolio allows us to offer exciting products at great value while driving incremental sales and improving margins. Our Brands’ quality and value proposition is especially important when inflation is affecting so many of our customers’ lives,” Kroger CEO Rodney McMullen told analysts on a call Thursday (March 2). “We will continue expanding Our Brands to more categories with innovative product offerings.”

Indeed, the success of grocers’ efforts earlier in this inflationary period suggests that the strategy is already paying off, with many consumers having traded down from name brands to lower-prices alternatives. Research from the October edition of the Consumer Inflation Sentiment study, “Consumer Inflation Sentiment: Consumers Buckle Down on Belt-Tightening,” for which PYMNTS surveyed more than 2,600 consumers in September, revealed that 37% of grocery shoppers reported purchasing lower quality products to reduce their expenses in the face of inflation.

The most recent United States Bureau of Labor Statistics (BLS) Consumer Price Index (CPI) data reveals that, while consumer food prices increased 10.1% year over year in January overall, grocery prices rose 11.3%.