NEW YORK -- America's national food, beverage and household brands struggle to regain favor in the hearts and minds of U.S. consumers for the fifth year in a row, according to Deloitte's annual American Pantry Study of more than 354 brands across 34 product categories.
Nearly 3 in 4 (73%) consumer packaged goods (CPG) categories show an overall decline in their brands' "must-have" status, meaning that shoppers would purchase whether on sale or not; however, this year's study also showed a drop in store brands' appeal, improved consumer perceptions of the economy and shoppers' willingness to pay a premium for attributes such as health and convenience, which may signal a turning point that is set to further disrupt the CPG industry after years of consumer caution.
"This is a critical moment for consumer product companies," said Barb Renner, vice chairman, Deloitte LLP and U.S. Consumer Products leader. "While the majority of consumers say they are committed to sustained frugality year after year, our findings point to early signs that they may finally be responding to a belated but increasingly strong economic recovery. It creates tremendous opportunities and risks for companies in this sector, given households' lack of commitment to national brands brought on by years of stretching dollars to the limit. Brands that get things right can use the economy's momentum to regain their place on consumers' shelves, but those that move too slowly could very well be left behind."
While previous years of economic stagnation fueled consumers' interest in store brands, this year's study revealed that trend may be reversing as recession-weary consumers loosen their purse strings. The number of consumers who view store brands as a sacrifice (43%) jumped 10 percentage points, while fewer consumers (65%) indicate they are more open to trying store-branded products, an eight-percentage-point decline.
Moreover, roughly one-quarter (25%) of consumers indicate they are willing to pay 10% or more for a product that is new or innovative, and one-third (33%) will do so for a craft version of food or beverages.
Understanding the drivers of at-the-shelf purchases can help brands improve their promotional strategies and better connect with consumers, according to Deloitte's study.
Approximately half (51%) of consumers make purchase decisions at the shelf, and while discounts and promotions are important, they are not the only deciding factor. When asked what triggers an impulse buy, 89% of shoppers cite discounted prices, but many also indicate that they bought an item because they remembered it when they spotted it in the store (81%), and nearly two-thirds (63%) say they did so because they wanted to try a new product.
"Although price remains the single biggest factor influencing at-the-shelf purchases, many other aspects can also catch shoppers' attention," said Rich Nanda, principal, Deloitte Consulting LLP and co-author of the study. "CPG companies should step back and consider challenging the status quo, rather than immediately resorting to discounts and promotions. Focusing more effort on non-price related triggers might seem risky in the short-term, but may improve long-term brand health, loyalty and margins."
Health and wellness attributes also rank high on consumers' shopping lists. Nearly 9 in 10 consumers (86%) prefer convenient options that are also healthy, and 25% are willing to pay a 10% premium or more for healthier versions of a product. Further, 41% chose the product at the shelf because the label addressed their health and wellness concerns.
Deloitte commissioned the 2015 American Pantry Study, which an independent research company conducted online in January 2015. The survey polled a sample of 4,013 consumers and has a margin of error of plus or minus two percentage points.
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