PYMNTS Data: Consumers Switch to Lower-Priced Grocery Brands, Merchants

As grocery prices continue to soar, consumers are adjusting their behaviors. Rather than remaining loyal to their favorite food and beverage brands as they become increasingly expensive, many grocery shoppers are swapping out their usual items for lower-cost alternatives.

Research from the May U.S. edition of PYMNTS’ Digital Economy Payments study, “Digital Economy Payments: How Consumers Pay in the Digital World,” showed that consumers’ average spending on their grocery purchases fell between March and April. This downtick came even as food prices themselves continued to rise, indicating that consumers were likely making the choice to shift to lower-priced brands or products.

Read more: Insufficient Funds Caused 27% of Consumer Payment Declines in April

For context, grocery price increases are outpacing inflation as a whole. The Consumer Price Index for All Urban Consumers (CPI-U), reported by the U.S. Bureau of Labor Statistics (BLS) Friday (June 10), found that food at home (i.e., grocery) prices grew 11.9% year over year in May, while prices for all items rose 8.6%.

Certainly, major grocers have been noticing just such a shift. Take, for instance, Walmart, the world’s largest grocery retailer. On a call with analysts in mid-May discussing the company’s first-quarter earnings results, Brett Biggs, Walmart’s executive vice president and chief financial officer, noted that these concerns are resulting in “an increase in grocery private brand penetration,” with consumers choosing lower price points over trusted brands. John Furner, the president and CEO of the company’s U.S. operations, added that this shift is especially pronounced in protein and dairy categories.

See more: Walmart Sees Shift to Private-Label Groceries Amid Rapid Food Inflation

Competitor Target noted a similar trend on its own most recent earnings call. The day after Walmart’s call, Target Executive Vice President and Chief Financial Officer Michael Fiddelke noted a trend of consumers choosing lower prices over brand name recognition, highlighting “strength of the own brands in food and beverage.”

Read more: Target Transforms Stores to Meet eGrocery Demand

Price not only motivates consumers’ product and brand choices but also their choice of merchant, according to data from PYMNTS’ study “Decoding Customer Affinity: The Customer Loyalty to Merchants Survey 2022.” The report, created in collaboration with Toshiba Global Commerce Solutions, found that 37% of grocery shoppers cited price as the single most influential factor when selecting a merchant from which to purchase, a greater share than said the same of any other consideration.

See more: 35% of Consumers Will Switch Grocers, Pharmacies for Better Digital Features

As some predict that inflationary challenges will continue to put pressure on grocers to find pricing solutions indefinitely into the future, grocery giant Albertsons Companies predicts that these difficulties will ease up later in the year as the supply chain recovers.

“Product availability continues to be a challenge, continues to be a little bit of whack-a-mole,” the company’s CEO, Vivek Sankaran, told analysts on a call in April discussing the company’s fourth-quarter 2021 earnings results. “We are imagining that product availability will continue to be a challenge through most of this calendar year, maybe middle of this year, at least, and maybe start to get some relief in the fall, which is why we also think there might be more supply, and that supply might pull down some inflation.”