General Mills Says Lower-Tier Brands See Trade-Down While Leaders Hold Strong

General Mills

Reflecting on the 2008 recession, General Mills is not worried about trade-down to private label.

Executives of the food giant, parent company of a range of popular cereal, snack, soup brands and more, said on a call with analysts Thursday (March 23) discussing the company’s third-quarter FY 2023 financial results that, even as challenging economic conditions put pressure on consumer spending, shoppers continue to opt for the company’s products.

To illustrate this resilience, CEO Jeff Harmening recalled what the company saw during the recession in the late ‘00s.

“What we found is that even though private label gained a little share back in 2008 to 2010, we were able to hold market share,” Harmening said, attributing this to the strength of the brands and to the company’s marketing investments.

Yet many consumers are trading down. Research from the January edition of PYMNTS’ Consumer Inflation Sentiment study “Consumer Inflation Sentiment: Perception Is Reality,” for which PYMNTS surveyed more than 2,100 consumers in December, reveals that 69% of consumers have made changes to their grocery shopping lists in the last year in response to rising prices. Fifty-nine percent have reduced the quantities of items they are purchasing, and 35% have reduced the quality.

General Mills maintains that the bulk of this trade-down is felt not by leading brands but by lower-tier competitors.

“Obviously, private label does well during [recessions],” Jon Nudi, General Mills’ group president, North America retail, told analysts. “But we’ve held our own and hold share relatively flat. It’s really the third- and fourth-tier players in categories that seem to get hit the hardest from a share standpoint.”

Retailers, meanwhile, continue to maintain that adoption of their private label brands has already been on the rise for some time. For instance, the nation’s leading grocer, Kroger, has been investing in its brands, launching new products and stepping up marketing.

“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 earlier this month. “We will continue expanding Our Brands to more categories with innovative product offerings.”

With rapid price increases prompting many consumers to rethink more of their purchasing decisions, retailers have been noticing private-label opportunities where previously there were none.

For instance, Casey’s, the third-largest convenience store chain in the nation, said on its most recent earnings call that increases in candy prices have left an opening for store brands.

“This is a great example of why private label is so important: we saw in the candy category that a lot of the national brands were passing on some impressive cost increases to all retailers, and it was starting to put some pressure on unit velocity,” Casey’s Chief Financial Officer Steve Bramlage said. “That gave us confidence to go into the candy bar category, which historically has been a really difficult category to penetrate because of the brand strength of the national manufacturers.”