Inflation’s Latest Victim: Brand Loyalty

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The other day, I got three boxes of mac and cheese from my local grocery store, a ninety nine cent store brand box, a classic one ninety nine box of Craft, and a fancy new option something called Goodles or Goodles for four ninety nine. This says it has protein in it, fiber in it, and twenty one nutrients from plants. We wanted to see what the real difference was, so we boiled them up. Let's start with a generic. It's looking gloopy. It's looking gloppy. It's looking exactly the same as Craft

It's cheese and it's noodles, and.

The premium brand Goodles for an extra four dollars. This is too fancy for me. I guess it has more protein in it, but I'm not really going to my macaroni and cheese for its protein potential or its nutrients. Our taste test revealed that for a cheese and noodle meal, between the store brand and the Craft, it was a toss up. These macaronis are very similar. I could spend

There was more of an affinity for big national brands.

Leslie Patten covers consumer brands for Bloomberg News.

Those were the brands they knew and had learned to love after lots and lots of marketing by these big companies, like a craft Heinz company. It was important to them to stock house with Hellman's mayonnaise, with tied laundry detergent, with specific brands. It was like a status symbol.

These weren't the budget options, but they weren't the most expensive things on the shelves either. Maybe you think of them as legacy brands, we'll call them middle brands. Over the past few years, Leslie says, the calculus around what brands to buy has started to shift.

Private label, so items made and sold by the actual retailer, the store that has the location, like a Walmart or a Target. Those have been gaining share for a while now. But I think really what's happened recently is some of these national brands have started to struggle. According to data that I've.

Looked at, what is that data tell you?

There's actually five categories that I've looked at. There's private label, which is the store brand. There's value items, which are the cheaper ones. There's mainstream national brands, there's premium, and then there's super premium, which is even higher price than

The biggest reason for these changes is a familiar one, inflation.

Just the persistent price increases we've seen over the.

Past three or four years has prompted shoppers to just be more discerning, to think a little more about what they're spending their money on, and lower to middle income.

Shoppers are making choices. They're saying, is this something that's really worth me? Split on. Maybe it is if it's for my child or for my health or something like that, but like maybe I can trade down in other categories that are considered more of like a staple item, you know, rice or maybe dish soap. I talked to the head of the Private Label Manufacturers Association, and she said, you know, people used to be a shame to have a bottle of Kirkland from Costco brand, you know, shampoo or shower

People are buying more products on these two ends of the price spectrum, the budget friendly private label products that stores like Walgreens and Costco and your neighborhood grocery store offer, and the premium stuff.

Maybe I'll trade down to the Kroger brand of soap instead of Dawn, or maybe I'll spend more money for a fancier one, like a broader Missus Meyers type brand.

Leslie says it's not necessarily income that divides the shoppers buying premium goods and private label goods. The exact same people might be buying things at either end of the spectrum, depending on the product, or the time of year, or their personal preferences. With limited resources and rising costs, shoppers just have to prioritize, and brand names are no longer the priority. Shoppers are open to trying new brands in

Because a lot of items were out of stock. Consumers were willing to buy anything during these pandemic shortages. So maybe they tried a private label they'd never tried before. Maybe they splurged, you know, they couldn't go out to eat at restaurants, so they were like, Hey, I'm going to splurge on this super fancy pasta sauce that I've never tried before instead of just buying RAG And they

Plus millennials and gen zers just don't shop the same way their parents do.

I think a lot of these big legacy brands that maybe the baby boomer generation bought, they're seen maybe by millennials. The next generation in younger gen z is kind of like these nostalgia brands. So maybe I want to, like, you know, eat comfort food once in a while, so I'll buy the velveta shells and cheese that my mom used to buy regularly for me. But it's not like an everyday purchase type of thing.

Younger generations also have shifting tastes, ones that aren't being fully served by these legacy mid tier brands.

They want to like try different things. They're more into intense, bold, spicy flavors. And now we're seeing even like ones that had been considered more premium get out premiumed by newer, younger hipper brands like Annie's Macaroni and Cheese, the organic brand that kind of used to be the premium brand. But now this new company called Goodles or Goodles however you want to pronounce it has like really bright neon

So how do the craft of the world win back their customers. Can the middle make a comeback that's coming up. When it comes to consumer tastes, Bloomberg's Leslie Patten knows that fads can come and go. Part of what makes a box of Kraft mac and cheese so appealing is that it's consistent. But as younger, price sensitive and quality conscious generations start leaning towards different products, these legacy brands are having to meet the moment.

We're not necessarily going to see Kraft mac and cheese like disappear from the shelves, but it is, you know, having a sales impact on them, and the companies are responding.

When you look at how these companies are trying to adapt, are they mostly trying to change their branding or creating new products entirely?

I think from the examples I've seen, they're trying to take existing items and make them more premium, try to take them up market in some way create a new benefit for consumers.

New benefits like a Boulder Taste.

Craft macaroni and cheese, whose sales have been down in the past year. They've been trying to hook younger shoppers with like new flavors. There's a jalapeno mac and cheese. Now there's a ranch mac and cheese now, so really dialing up kind of the spice.

So they're mostly reaching up rather than down. They're trying to turn premium rather than compete with those cheaper private labels.

I think that's right. You have to be really careful when you innovate on the value side with a well known brand, because you can dilute the brand to people, you can make it a less attractive brand. So like if you have Bounty paper towels, you know, if you have a cheap inversion of Bounty, that kind of lessens the brand to people.

And the brand is everything. If you don't know what kind of quality you're going to get when you buy a roll of Bounty paper towels, why buy Bounty. A particularly weird quirk about all of this is that some of these big companies own multiple brands at different price points, targeting different customers, so they can try to market their middle products to more premium customers, but then they risk cannibalizing sales from their premium products. Take diapers, for example.

Loves Diapers had been losing market share for a long time, and they recently just launched a new and improved line of love stapers that it's called Love's Platinum. They're saying these are their softest diapers ever, and they have twelve hour absorbency, and they're charging a premium for two. They raise the prices on it. But at the same time, like Procter and Gamble, the maker of Loves has to be kind of careful because they also own the premium line of Pampers.

Ultimately, a lot of these kinds of shopping choices will be left up to personal taste, but Leslie thinks this bifurcation is likely to continue. And as I can attest, paying more for mac and cheese doesn't mean you're gonna like it more. Leslie's family has figured this out too.

I actually made my kids do the taste test on macaroni and cheese. I have three kids. I made them do like private label Craft I think, and then the good Oles brand, and I got answers all over the place. One of them was like, I like Craft best, and one of them was like, I like this other stuff. And then my daughter liked the good Oles brand, which is kind of like, oh, well, then why would I

You could just buy all three like I did and eat mac and cheese for lunch and dinner for the rest of the week. Thanks for listening to The Big Take from Bloomberg News. I'm Sarah Holder. This episode was produced by Julia Press. It was edited by Tracy Samuelson and Becca Greenfield. It was mixed by Alex Sugiura and fact checked by Adrenatapia. Naomishevin, who also edited this episode, is our senior producer. Elizabeth Ponso is our senior editor.