Brand Loyalty Takes Hit From Inflation and Shortages

Popular brands and flashy advertising campaigns are no longer enough to keep US consumers at grocery stores, retail executives say. As widespread inflation and strained supply chains leave gaps on store shelves, shoppers are becoming increasingly fickle, with availability and price-determining with what goes into their cart.

New buyers' willingness to rebrand could change the balance of power in grocery stores. Industry executives say major food companies like Kraft Heinz Co. and Kellogg Co. risk losing market share to competitors, and store brands are more likely to fill empty spaces in store aisles.

Tony Sarsam, chief executive officer of grocery chain SpartanNash Co has said that he and his team are examining the variety of groceries the company sells. The grocery chain is also giving more shelf space to local brands, which are able to keep products in stock.

As consumers try less familiar names, brand loyalty for companies with supply challenges is falling, according to market research firm IRI. The firm also said that brands with low availability or in-stock rates of between 72% and 85% have lost 0.7% point of share of wallet on average. 

According to industry analysts, consumers often stick to brands they know out of convenience and buy more items from brands that they are familiar with. But shoppers will have to switch brands when belt-tightening if they find a better deal. 

During the financial crisis, major brands across the grocery stores developed a lower-priced versions of their products to try to keep consumers loyal, as Procter & Gamble Co did with cheaper versions of Tide detergent, Olay skin cream and diapers for example.

However, currently, shoppers feel the pressure of higher prices while facing shelves that are short on products at the same time. These factors are driving more customers to switch brands, executives said.