The consumer’s focus is largely on cost containment at home and loss of purchasing power. Inflation immediately lowers the standard of living for most people. It is valid to interpret inflation as the worst tax suffered by consumers, even having money in the bank represents a loss of value. The purchase of products that were previously considered “daily consumption” becomes a luxury for a large part of the population, consequently they move towards the top of the pyramid.
Brands —in contrast— have done little to understand the effects of inflation on consumer preference, in most cases they have reduced the size of the package or final product while containing the price. The strategy pays off in the short term but does not attack the central problems of price increases. The consumer immediately perceives that the purchased product has less performance, from a box of detergent that lasts fewer weeks to cereal that only lasts for a fortnight. Changing the size of the package only solves the perception of spending at the checkout in the supermarket.
Free-label marketing strategies that were slowly rising in price during times of price stability are now back in a position of strength. Own brand and generic products are of special interest to points of sale. According to the Harvard Business Review, the average share of private labels from 1976 to 1996 was 14 percent, during the recession of the 1980s it was 17 percent. From 2020 to 2025 we will see a recession and economic crisis much greater than that of the eighties. In 2021, the share of own brands reached 17.3 percent according to IRI. The fastest growing private label segment in the United States is beverages, followed by food. The full value is more than 77 billion dollars in that country according to Nielsen and PLMA.
The growth of own brands is a precursor to the increase in the consumption of bulk products. This signals a structural shift in purchasing patterns, puts at risk—among other categories—the idea of branded coffee shops like Starbucks, and points to the potential return of generic coffee. It also —as a side effect— encourages the growth of alternative or proprietary brands. The phenomenon will not stop at own brands, it will end at “own points of sale”. The consequences of a private label ideology go beyond buying patterns and challenge the most important pillar of marketing: trust.
The trust that brands demand from consumers may be lost for price reasons. The price increase also has effects on socioeconomic segments. Major stores like Target have experienced a significant revamp of their private label strategy over the past 5 years, with their older brands like Archer Farms and Simply Balanced being pushed off the shelf in favor of their new Good & Gather brand. They have also added brands like Everspring and Smartly to complement their Up & Up brand of home essentials.
Own brands are part of the consumer ecosystem and are not always cheaper, but they are considered an alternative for change by the consumer. Its promotion at the point of sale is guaranteed as it is part of the internal portfolio of the stores. It is time to return attention to these new competitors.