A full 73 percent of consumer packaged goods (CPG) categories are showing a decline in their status as a must-have, even when on sale, according to Deloitte's annual American Pantry Study.
The study, which covers more than 354 CPG brands across 34 categories, found that it wasn't just national brands that are losing favor with consumers. This year's research showed a change in attitudes about store brands — which often appeal on price — to premium goods whose appeal is based on attributes such as convenience and health.
According to Deloitte, 25 percent of consumers are willing to pay 10 percent or more for a product that is either new or innovative and 33 percent are willing to do the same for a craft version of a food or beverage.
"This is a critical moment for consumer product companies," said Barb Renner, vice chairman, Deloitte LLP and U.S. Consumer Products leader, in a statement. "While the majority of consumers say they are committed to sustained frugality year after year, our findings point to early signs that they may finally be responding to a belated but increasingly strong economic recovery. It creates tremendous opportunities and risks for companies in this sector, given households' lack of commitment to national brands brought on by years of stretching dollars to the limit. Brands that get things right can use the economy's momentum to regain their place on consumers' shelves, but those that move too slowly could very well be left behind."
While price may be less of a factor than in recent years, it is still significant in consumers' purchasing decisions. According to Deloitte, 51 percent of shoppers make purchasing decisions at the shelf. Eighty-nine percent of these cite discounts as a driver in their decisions. Price however, is not the only way to drive sales, according to the study's authors.
Rich Nanda, principal, Deloitte Consulting LLP and co-author of the study, said, "CPG companies should step back and consider challenging the status quo, rather than immediately resorting to discounts and promotions. Focusing more effort on non-price related triggers might seem risky in the short-term, but may improve long-term brand health, loyalty and margins."
Convenience and health are high on consumers' lists. Best of all is a combination of both. Eighty-six percent prefer products that are both healthy and convenient. Twenty-five percent are willing to pay a 10 percent premium for that combination.