A new survey shows brand loyalty has dropped for the third year in a row. Deloitte's annual American Pantry Study shows nearly nine in 10 consumers are substituting private-label, or store, brands for national brands they have regularly bought in the past.
The survey, which was conducted in January, also finds 94% of Americans indicate they will remain cautious and keep their spending for food, beverage and household goods at its current level despite the stronger economy and climbing stock market.
The last recession left a deep scar and many consumers are harboring a tremendous amount of remorse over prior careless spending habits, according to Pat Conroy, vice chairman and U.S. Consumer Producers Leader at Deloitte. He believes there has been a permanent shift in the way people shop.
"The recession was so severe that people across all income levels had to go out and experiment with ways to save. They tried various lower cost options and the vast majority of them found there was little noticeable difference in quality," said Conroy. "This was an epiphany for the consumer."
The consumer staples business is facing the steepest uphill battle to get back customers who have wandered, Conroy said.
"Every manufacturer has been affected by this," he added. "None of the manufacturers had as many must-have brands as they thought they did. The playing field has fundamentally changed. It will not go back to the way it was right before the recession…. Manufacturers must find a way to differentiate the product and find a better way to get the product into the consumer's pantry."
Los Angeles-based branding expert Rob Frankel said he expects the penetration into private brands in the U.S. is only getting deeper.
"Conditions are ripe for that because the major brands aren't articulating their brand strategies," Frankel said. "That makes them vulnerable to private labels, which yield higher margins -- and easier relationships, terms and conditions -- to retailers."