Colin Stewart, SVP at AMG Strategic Advisors, gave attendees at the Federated Foods 2012 Summer Buying Show in Chicago a look at Acosta Sales & Marketing’s new spring edition of its “Why? Behind the Buy” study. Published twice yearly, the study explores shopper trends, what shoppers think about private brands and the economy, how gas prices impact the way people shop, and more.
Stewart described the latest version as a “tale of two shoppers,’ referring to the divide between the highest and lowest income earners that continues to grows wider.
Forty-six percent of households in the U.S. have annual incomes of less than $45,000. The average age in these households is 49, about half are married and about a quarter have children.
“They represent about 30 percent of the total grocery spending, and this group spends about $300 a month to feed their families,” he said. “They spend about $250 on food at home and about $56 on food away from home (per month). Those shoppers definitely have different attitudes and behaviors than more affluent shoppers earning over $100,000 a year.”
Those in the $100,000 annual income group, representing about 15 percent of total shoppers, are more likely to be married and have children, and they spend more on groceries.
“This group represents 18 percent of the total grocery spending,” Stewart said. “They spend about $600 a month to feed their families—$400 on food at home and about $188 on food away from home.”
The economy is not recovering at the same rate for these shopper groups. The more affluent have exited the recession, he said. That is not the case for households at the lower end of the income scale.
“If you look at the group that’s under $45,000, there’s a large portion that is still struggling,” Stewart said. “They’ve taken lower paying jobs; they’re doing without—40 percent use food stamps to pay for most of their groceries. They’re spending less. They’re making fewer trips, and about one in three in that group is matching their shopping trip up with their paycheck.”
Meanwhile, the more than $100,000 group “is doing OK,” he said. “They’re starting to get new jobs. They’re taking higher paying jobs in some cases. About one four indicate that they’re going without or buying less. About half use a credit card to buy their groceries to gain the reward and points on those credit cards. They’re starting to spend more. Only 14 percent indicated they are making more trips vs. the 35 percent of the lower income groups.”
Only about one in 10 match their shopping trip with when they get their paychecks, he said.
The under-$45,000 group has been trading down or forgoing some products, especially in discretionary categories. Not so for the upper income shoppers.
“You look at the over-$100,000 (group) in categories like adult yogurt—that category is coming from a more affluent shopper—coffee creamers, oral hygiene and pet food are categories where we’re starting to see shoppers on the upper income side indicate they are purchasing more in those categories,” Stewart said.
Stewart suggests capitalizing on this by offering a private label alternative for those products upper-income households are already buying.
Private brand growth has outpaced national brands “by nearly double,” growing 6 percent across all channels on a total store basis vs. 3 percent growth for national brands.
“That’s pretty consistent across every category, across the whole store,” he said.
One of the questions asked about private brands in the study is, “Overall, would you agree with the statement that the private brand in this category is overall about the same as the national brand in the category?”
One of the top categories is dried pasta. Seven out of 10 shoppers earning under $45,000 a year indicate that the private brand is just as good as the national brand in the category.
There were high scores for the upper-income households, too, Stewart said, but, “It does skew a bit to the lower income group.”
Private brands are a deciding factor when younger consumers choose their stores.
“One of the questions we ask shoppers is, ‘When you’re making a selection on where you’re going to go shopping for your groceries, to what degree does private brand impact that decisions?’” Stewart said. “The younger generations are more likely to indicate that the decision to shop or their preferred location can be swayed by private brand within the store.”
Two very different generations have the buying power
Consumers move into their heaving spending years between the ages of 30 to 54, and retiring baby boomers are still a powerhouse when it comes purchasing.
“What we’re seeing today is this younger generation of window shoppers starting to move into that heavy shopping period, and they’re moving there with different attitudes and behaviors at least than their parents and their grandparents had,” Stewart said. “And then at the same time, you’ve got this group over 65, the retiring boomer generation, the empty nest generation becoming a very large segment of the population. So think about how you target both of those segments.”
For example, Campbell’s red and white cans have been around for decades. It is an iconic brand.
“But the younger generation shopper doesn’t recognize that. They don’t care about that. In fact, they don’t like the cans,” he said. “Campbell’s has recognized that and is coming out with new bold flavors and a new package that’s in a pouch, doing things that are more aligned with the needs of younger shoppers.”
Trader Joe’s is using “app-like icons” on its private label products and right at the shelf to draw the eyes of the younger shopper to signal gluten free, vegan or vegetarian products.
In feature photo at top: Colin Stewart, SVP at AMG Strategic Advisors, speaks to attendees at the Federated Foods 2012 Summer Buying Show in Chicago July 22.