Consumers’ focus on value isn’t going away anytime soon, says editor Dan Malovany.



Like a smoker who quit cigarettes or a druggy on crack, consumers spent too many years borrowing and spending like there was no tomorrow. It became a bad habit they couldn’t stop.

They mortgaged their houses once, twice and three times to pay for everything from college tuition for their spoiled kids or to splurge on a new gas-guzzling SUV even before the loan was paid off.

Don’t worry, they thought. We’ll just sell the house for a killing to pay everything off. We gotta have it now!

Then all of a sudden the economy deep-sixed last September, forcing millions of consumers to cut back on spending and many more to go cold turkey. For many, it was a painful adjustment as the reality that their finances were in deep doo-doo finally sunk in to their thick skulls.

Within six months, they made the painful adjustments, cutting back on travel, dining out, trading down to private label brands and only buying their favorite brands only when they were on sale.

In the snack and baking industries, “value” has replaced whole grains, health and convenience as the No. 1 buzzword for this year.

Bakers and snack producers should get used to hearing that buzzword because consumers, although tempted, might not go all the way back to their free-spending ways, at least not anytime soon.

In fact, 91% of shoppers indicate they will keep buying store brands after the recession ends, according to a poll by GFK Custom Research North America for the Private Label Manufacturers Association. Only 8% indicated they would stop buying these products. That’s because nine out of 10 shoppers agree that many private label brands are as good as, or better than, national branded products.

Now, I’m sure most of these percentages reflect the current mood of shoppers, many of which will fall off the wagon and revert back to spending as soon as they think they can afford it. All it takes is a simple splurge or so and the shop-a-holics are back to their old credit-happy ways.

At the same time, a good number of consumers have changed their habits and found that, yes, many of these store brands are as good as their branded counterparts. Just look at the Kirkland brand at Costco or the Archer Farms line at Target. These products are as good, and more innovative in some cases, than their nationally branded counterparts.

In the bread aisle, many of these products are as good as the national brands because, well, they’re just the same product. It’s no secret that most private label bread is the same quality as branded because, well, they’re the same product. Only the bag is different.

Private label’s popularity will remain high because many retailers have forced their suppliers to upgrade the quality of their store brands, where the profit margin can be significantly higher than national brands even though the private label products are sold at a discount. To compete with private label, many bakers and snack producers are offering deeper discounts and conditioning consumers that a lower price should be the norm. In other cases, for instance, they’ve learned to stock up when a premium brand of English muffins sells at two-for-one because they know it will go on sale in a couple of weeks, just like clockwork.

Another factor is that this recession is unlike others. Some say it’s worse than any recession since the 1970s, and others claim it’s as bad as it was in the 1930s. Some say it may linger like the after effects of a bad cold.

Consumers, especially those Baby Boomers who are nearing an age when they wanted to retire but no longer can afford to do so, will keep their belts tight. Others who saw their portfolios plummet during the economic crisis might remain cautious as the economy improves.

Yet another is the specter of inflation, which may rear its ugly head as the result of the tremendous amount of government borrowing and the extraordinary easing of money from the feds. It just takes a match for this wildfire to blow up.

Then again, Goldman Saks predicts that the Wall Street darling may pay out an average of $1 million in bonuses to its employees.

No doubt, the spending spree will begin, at least for some of them.

As they say, once an addict…always an addict.


Dan Malovany, editor
malovanyd@bnpmedia.com