As grocery retailers observe consumers shifting to private-label items in the face of rising prices, leading food and beverage (F&B) brands are standing their ground, arguing that this trend is not the threat to their business that some might imagine.
The Kraft Heinz Company, for one, parent of a wide range of leading F&B brands including its self-titled ones, Ore-Ida, Kool-Aid and many more, said on a call with analysts Wednesday (July 27) discussing its second-quarter fiscal year 2022 financial results that the company can effectively combat this trend with tiered pricing.
“One of the things we’re actually looking at is how we actually allow consumers to stay in iconic brands,” CEO Miguel Patricio said. “And it’s because of the number of ranges of products across our pricing ladder.”
He cited the example of the Oscar Mayer brand, in which options range from “Natural” to “Deli Fresh” to “Original Oscar Mayer,” with each one in a different pricing bracket, and he noted that there is a similar range for Kraft cheeses.
Mondelez International, meanwhile, parent company of Cadbury, Oreo, Ritz and other leading snack and confectionery brands, said its ability to combat this shift comes from the affinity that it has built with its customers.
“Due to enduring consumer loyalty, category volume growth and penetration is holding up well in most of our key developments,” CEO Dirk Van de Put told analysts on a call Tuesday (July 26) concerning the company’s Q2 2022 results. “Private label is either flat or down in the vast majority of our markets, and shoppers say they are much less likely to switch to private label in chocolate and biscuits compared to other categories.”
Global beverage giant Coca-Cola, meanwhile, contends that this shift is not even much of an issue for F&B brands yet. Chairman and CEO James Quincey said on a call with analysts Tuesday concerning the company’s Q2 2022 results that, “a typical recessionary pattern,” based on historical data, sees consumers refrain from purchasing “high-ticket item, discretionary things” first, putting off major purchases until a time when the economy is stronger.
“They then start saving on the lower-ticket items, and they trade down in categories which have weaker leader brands, and then eventually, it might hit the grocery categories with strong leader brands and the away-from-home,” he said. “So, we tend to have some lead time going into a normal recession.”
These companies’ reports are a departure from those of leading grocers. The world’s largest grocery retailer, Walmart, noted in its May earnings call that consumers have been switching to private-label items, and competitor Target said the same. Similarly, the United States’ leading pure-play grocer Kroger observed in its June earnings call that it “saw tremendous growth in Our Brands” as consumers became more concerned about their grocery spending.
Additionally, in a recent interview with PYMNTS, Dave Bass, managing director of Ahold Delhaize-owned eGrocer FreshDirect, noted that Ahold Delhaize’s brand Nature’s Promise has been growing “at a very high rate, more so than we even expected” and that, as such, the eGrocer intends to expand the brand going forward.