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Editor's Plate: Food Price Increases Are Testing Consumer Loyalty

May 9, 2023
Surveys show consumers are willing to abandon brand loyalty for lower prices. Editor in Chief Dave Fusaro ponders in his May editorial: How long can the largest food and beverage companies sustain consumers jumping ship?

In my 30 years of writing about the food & beverage industry, I’ve seen the highs and lows of consumer perceptions of food companies. While we’re coming off a three-year love affair between consumers and the food industry, I see some indications the romance may be souring.

I give presentations once or twice a year, and one of the themes I always bring up is consumer perceptions of the food & beverage industry, especially what I call Big Food. As depicted in the splendid History Channel series, “The Food That Built America,” legendary names such as Henry Heinz, John and Will Kellogg and Milton Hershey created not just great products but ones that were safe, consistent, affordable and widely available. In the process, they started the public’s love affair with what would become Big Food.

And that love affair endured … at least until the past decade or two. The average consumer’s impression of Big Food was altered by events like Jack in the Box, the appearance of food & beverage CEOs on “highest paid CEOs” lists and news stories of illicit lobbying against state referenda, price fixing and knowingly allowing tainted products into the market.

Then the pandemic hit, and Big Food delivered what consumers wanted most: trusted brands, wholesome products and a nearly uninterrupted supply. The love was back.

But there are indications the relationship is on the rocks again. Here are some bullet points from February market research from consumer research platform Attest: 

  • 80% of Americans believe brands (in all categories) are using inflation as an excuse to hike prices. 
  • 71% said they will drop brand loyalty to food & beverage brands to save money. 

So much for brand loyalty … and brand-building. 

Sure, bird flu affected egg-laying hens, but did that really justify $6-a-dozen eggs (and Cal-Maine Foods’ $1 billion in gross profit in just three quarters of this year)? Why are Coca-Cola and Pepsi, two staples of my diet, list-priced at $3.29 per two-liter bottle at my two (presumably competing) local grocery stores? I think you can get two quarts of beer for less than that. A year or so ago, they listed at $1.99, and there were plenty of promotions for half that price. I can’t believe the price of their ingredients went up 65%. 

We’ve written a number of stories about inflation, for both consumers and food & beverage companies. Sure, the price of everything went up last year, ingredients and other supplies included. Seeing nightly news stories on the cost of housing, cars, computers, everything going up, consumers accepted rising food prices. For a while.

We're just about to close our 52nd annual R&D Survey – you'll see a full report on that next month. In two new questions this year, two-thirds of respondents are no longer having trouble sourcing ingredients, and another two-thirds saw ingredient prices rise by "only" 5-25% in the past year.

There have been many reports like the Attest survey. We've also reported occasionally on the quarterly financial reports of the bigger food & beverage companies, and almost all say the same things: record profits, record sales in dollars but lower volume. That last item is a bad omen.

I've got to believe contract manufacturers and private labelers are watching these news stories with delight. Hearthside Foods and TreeHouse Foods are anticipating volume gains (although they're both facing headwinds of their own making). "Store Brand Sales Grow in 71% of All Categories in Q1," trumpeted a headline from the Private Label Manufacturers Assn. Maybe more telling is store brands saw volume growth, too, in 38% of the 317 categories tracked.

So don’t forget recent history. Nine of the 18 largest food & beverage companies experienced four or five consecutive years of sales declines 2015-2019, and consumer perceptions of the industry were low. Let’s not go back there; let’s make the prices right. 

About the Author

Dave Fusaro | Editor in Chief

Dave Fusaro has served as editor in chief of Food Processing magazine since 2003. Dave has 30 years experience in food & beverage industry journalism and has won several national ASBPE writing awards for his Food Processing stories. Dave has been interviewed on CNN, quoted in national newspapers and he authored a 200-page market research report on the milk industry. Formerly an award-winning newspaper reporter who specialized in business writing, he holds a BA in journalism from Marquette University. Prior to joining Food Processing, Dave was Editor-In-Chief of Dairy Foods and was Managing Editor of Prepared Foods.

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