For consumers and businesses alike, headlines on rising food and beverage prices continue to underscore supply chain issues for food and beverage producers with resulting effects on rising grocery bills for consumers at food retail.

Reporting on the inflationary aspects of price shocks in a wide range of food and beverage categories, the Anchorage Daily News (via the Washington Post) notes:

“Before the pandemic, most people didn’t think much about where food came from, how much it traveled or how it was assembled. Certain industry phrases have underscored rising grocery bills over the past 18 months. “Turbulence and volatility.” “Unprecedented times.” But one of the biggies is “supply-chain disruption.” Food producers have struggled with shortages, bottlenecks, transportation, weather and labor woes, all of which have caused food prices to rise. The end is not in sight: Inflation at the wholesale level climbed 8.3% last month from August 2020, the Labor Department reported Friday, the biggest annual gain since it started calculating the number in 2010. Those prices are passed on to consumers: meat, poultry, fish and eggs are up 5.9% over the last year, and 14.7% from prices in July 2019, before the pandemic.”

For consumers, increased prices for a variety of food and beverage products are a tangible—and often daily—indicator of supply chain volatility affecting food and beverage. Consumers face rising prices in many food and beverage categories and are more likely than ever to reassess their habitual purchases.

This calculus could trigger brand switching and create opportunities for categories and brands, especially those that offer accessibly priced alternatives, as well as higher-quality offerings with clearly articulated value.

Such a setting for brand switching occurs during a general erosion of brand loyalty, signs of which were just examined in our Brand Ambition: Food and Beverage Private Brands & Beyond report, which describes how expectations of food and beverage brands have evolved along with a dramatically changing cultural landscape, elements of which include:

• An increasingly sophisticated understanding consumers have of their health (and the many ways our bodies are interconnected and affected by the outside world) and
   
• A vastly expanded access to information, fueling not only consumers’ understanding of health but also of other benefits that foods and beverages can or should deliver.

One example from the Brand Ambition report that speaks to the potential for brand switching ahead: Within eight categories tested for attributes driving purchases among both buyers and non-buyers of name and private label brands, according to shoppers who currently do not buy private brands within the condiments/dressings category, while most are open to private brand trial, an impressive one-third (33%) express a strong likelihood of doing so (21% indicated they likely would try and 12% said they definitely would try, Figure 1).

While sales and promotions are strong drivers of trial purchases among current buyers of condiments/dressings (both name brand and private label), for those consumers not currently buying private label versions in the category, most would like to have an opportunity to sample products for taste. Thus, trialing private label products in condiments/dressings is less about exploring new flavors and more about making sure the products deliver on expected classic tastes.

Figure 1: Willingness to try private brands within the Condiments/Dressings category
(Among category buyers currently not purchasing private brands)
Source: Brand Ambition: Food and Beverage Private Brands & Beyond report, The Hartman Group, Inc.

Influences on trial purchasing in a category like condiments/dressings that extend beyond sales and promotions underscore how expectations of food and beverage brands are evolving. As highlighted in the Brand Ambition report:

“Consumers today are far more empowered than ever before to demand that brands meet this expanded and diversified set of needs. They assess taste, quality and attributes related to health, nutrition and sourcing purity before consciously using brand itself as a product selection driver. They are open to switching when another product or brand better meets their needs or better suits their wallets.”

Such findings underscore that in the days ahead, brands asking consumers to remain loyal and pay premium prices would do well to communicate that price increases are benefiting more than a corporate bottom line.

While different by category, waning brand dependency means that all food and beverage brands, both private and name, must now compete more on the basis of individual product attributes and overall consumer satisfaction with specific products rather than relying on the strength of the brand to carry underperforming products that do not meet consumers' needs or expectations.