1 00:00:03,080 --> 00:00:07,440 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. 2 00:00:08,280 --> 00:00:11,000 Speaker 2: The other day, I got three boxes of mac and 3 00:00:11,080 --> 00:00:14,480 Speaker 2: cheese from my local grocery store, a ninety nine cent 4 00:00:14,600 --> 00:00:18,599 Speaker 2: store brand box, a classic one ninety nine box of Craft, 5 00:00:19,160 --> 00:00:23,720 Speaker 2: and a fancy new option something called Goodles or Goodles 6 00:00:24,320 --> 00:00:27,920 Speaker 2: for four ninety nine. This says it has protein in it, 7 00:00:28,040 --> 00:00:31,240 Speaker 2: fiber in it, and twenty one nutrients from plants. We 8 00:00:31,280 --> 00:00:34,800 Speaker 2: wanted to see what the real difference was, so we 9 00:00:34,880 --> 00:00:38,320 Speaker 2: boiled them up. Let's start with a generic. It's looking gloopy. 10 00:00:38,320 --> 00:00:41,320 Speaker 2: It's looking gloppy. It's looking exactly the same as Craft 11 00:00:41,720 --> 00:00:45,120 Speaker 2: for ninety nine cents. I was impressed. It's really good. 12 00:00:45,479 --> 00:00:48,160 Speaker 2: It's really hearty, better than I expected when I saw 13 00:00:48,200 --> 00:00:51,320 Speaker 2: the box, and it looked like something someone on like 14 00:00:51,400 --> 00:00:55,360 Speaker 2: Microsoft Paint created for a dollar more. The box of 15 00:00:55,440 --> 00:01:00,360 Speaker 2: Craft had a slightly thinner sauce, a less aggressively orange color, 16 00:01:01,000 --> 00:01:02,680 Speaker 2: but it also tastes really good. 17 00:01:02,920 --> 00:01:04,959 Speaker 1: It's cheese and it's noodles, and. 18 00:01:04,880 --> 00:01:08,760 Speaker 2: The premium brand Goodles for an extra four dollars. This 19 00:01:08,920 --> 00:01:10,960 Speaker 2: is too fancy for me. I guess it has more 20 00:01:11,000 --> 00:01:13,280 Speaker 2: protein in it, but I'm not really going to my 21 00:01:13,319 --> 00:01:16,720 Speaker 2: macaroni and cheese for its protein potential or its nutrients. 22 00:01:17,520 --> 00:01:20,920 Speaker 2: Our taste test revealed that for a cheese and noodle meal, 23 00:01:21,240 --> 00:01:24,120 Speaker 2: between the store brand and the Craft, it was a 24 00:01:24,160 --> 00:01:28,120 Speaker 2: toss up. These macaronis are very similar. I could spend 25 00:01:28,240 --> 00:01:33,640 Speaker 2: ninety nine cents on dinner and be perfectly satisfied. There 26 00:01:33,640 --> 00:01:36,160 Speaker 2: are so many options when you walk down a grocery 27 00:01:36,160 --> 00:01:40,000 Speaker 2: store aisle nowadays, so many price points and package colors 28 00:01:40,040 --> 00:01:44,240 Speaker 2: and new and improved flavor buzzwords, so many choices shoppers 29 00:01:44,240 --> 00:01:47,920 Speaker 2: have to make. A new Bloomberg reporting has found that 30 00:01:48,080 --> 00:01:52,400 Speaker 2: consumers are increasingly choosing the low cost and premium brands. 31 00:01:53,160 --> 00:01:58,120 Speaker 2: Those steady legacy mid tier brands like Craft are losing 32 00:01:58,200 --> 00:02:07,040 Speaker 2: out today on the show as more customers try to 33 00:02:07,120 --> 00:02:10,720 Speaker 2: save a buck or level up. Brands in the middle 34 00:02:10,800 --> 00:02:14,760 Speaker 2: are feeling the squeeze. What's causing this problem for mid 35 00:02:14,800 --> 00:02:18,400 Speaker 2: tier brands and how will the trend transform what's on 36 00:02:18,400 --> 00:02:21,480 Speaker 2: our shelves? This is the big take from Bloomberg News. 37 00:02:21,919 --> 00:02:32,120 Speaker 2: I'm Sarah Holder. For decades, shoppers scanning shelves in the 38 00:02:32,160 --> 00:02:35,520 Speaker 2: grocery aisles had a pretty clear calculus they used to 39 00:02:35,639 --> 00:02:37,680 Speaker 2: choose what brand to buy. 40 00:02:37,720 --> 00:02:41,760 Speaker 1: There was more of an affinity for big national brands. 41 00:02:42,080 --> 00:02:45,359 Speaker 2: Leslie Patten covers consumer brands for Bloomberg News. 42 00:02:45,680 --> 00:02:49,160 Speaker 1: Those were the brands they knew and had learned to 43 00:02:49,240 --> 00:02:55,040 Speaker 1: love after lots and lots of marketing by these big companies, 44 00:02:55,200 --> 00:02:59,320 Speaker 1: like a craft Heinz company. It was important to them 45 00:02:59,440 --> 00:03:04,760 Speaker 1: to stock house with Hellman's mayonnaise, with tied laundry detergent, 46 00:03:05,680 --> 00:03:09,680 Speaker 1: with specific brands. It was like a status symbol. 47 00:03:10,160 --> 00:03:12,880 Speaker 2: These weren't the budget options, but they weren't the most 48 00:03:12,919 --> 00:03:16,280 Speaker 2: expensive things on the shelves either. Maybe you think of 49 00:03:16,320 --> 00:03:20,600 Speaker 2: them as legacy brands, we'll call them middle brands. Over 50 00:03:20,639 --> 00:03:24,160 Speaker 2: the past few years, Leslie says, the calculus around what 51 00:03:24,440 --> 00:03:26,800 Speaker 2: brands to buy has started to shift. 52 00:03:27,000 --> 00:03:31,960 Speaker 1: Private label, so items made and sold by the actual retailer, 53 00:03:32,080 --> 00:03:35,000 Speaker 1: the store that has the location, like a Walmart or 54 00:03:35,000 --> 00:03:38,520 Speaker 1: a Target. Those have been gaining share for a while now. 55 00:03:38,880 --> 00:03:42,160 Speaker 1: But I think really what's happened recently is some of 56 00:03:42,200 --> 00:03:46,120 Speaker 1: these national brands have started to struggle. According to data 57 00:03:46,160 --> 00:03:46,800 Speaker 1: that I've. 58 00:03:46,560 --> 00:03:48,320 Speaker 2: Looked at, what is that data tell you? 59 00:03:48,600 --> 00:03:53,640 Speaker 1: There's actually five categories that I've looked at. There's private label, 60 00:03:54,200 --> 00:03:57,160 Speaker 1: which is the store brand. There's value items, which are 61 00:03:57,200 --> 00:04:01,720 Speaker 1: the cheaper ones. There's mainstream national brands, there's premium, and 62 00:04:01,760 --> 00:04:04,560 Speaker 1: then there's super premium, which is even higher price than 63 00:04:04,640 --> 00:04:07,760 Speaker 1: the premium. And the data I have shows that for 64 00:04:07,880 --> 00:04:13,200 Speaker 1: this year through mid July, private label premium and super 65 00:04:13,240 --> 00:04:18,960 Speaker 1: premium sales volumes are up, but value in mainstream those 66 00:04:19,000 --> 00:04:22,680 Speaker 1: are items that are produced by big, big companies like 67 00:04:22,800 --> 00:04:27,520 Speaker 1: Procter and Gamble or a craft Hinds, those sales units 68 00:04:27,560 --> 00:04:30,280 Speaker 1: are down for the same time. So that shows you 69 00:04:30,400 --> 00:04:32,479 Speaker 1: right there we have growth at the two ends of 70 00:04:32,520 --> 00:04:34,680 Speaker 1: the spectrum and a shrinking middle. 71 00:04:35,120 --> 00:04:40,039 Speaker 2: The biggest reason for these changes is a familiar one, inflation. 72 00:04:40,600 --> 00:04:43,760 Speaker 1: Just the persistent price increases we've seen over the. 73 00:04:43,720 --> 00:04:47,279 Speaker 3: Past three or four years has prompted shoppers to just 74 00:04:47,360 --> 00:04:50,240 Speaker 3: be more discerning, to think a little more about what 75 00:04:50,279 --> 00:04:54,880 Speaker 3: they're spending their money on, and lower to middle income. 76 00:04:54,600 --> 00:04:58,400 Speaker 1: Shoppers are making choices. They're saying, is this something that's 77 00:04:58,560 --> 00:05:02,159 Speaker 1: really worth me? Split on. Maybe it is if it's 78 00:05:02,160 --> 00:05:05,320 Speaker 1: for my child or for my health or something like that, 79 00:05:05,839 --> 00:05:09,400 Speaker 1: but like maybe I can trade down in other categories 80 00:05:09,400 --> 00:05:12,400 Speaker 1: that are considered more of like a staple item, you know, 81 00:05:12,760 --> 00:05:17,599 Speaker 1: rice or maybe dish soap. I talked to the head 82 00:05:17,600 --> 00:05:21,720 Speaker 1: of the Private Label Manufacturers Association, and she said, you know, 83 00:05:22,200 --> 00:05:24,600 Speaker 1: people used to be a shame to have a bottle 84 00:05:24,640 --> 00:05:29,599 Speaker 1: of Kirkland from Costco brand, you know, shampoo or shower 85 00:05:29,720 --> 00:05:33,120 Speaker 1: gel in their bathroom. That's not the case anymore. 86 00:05:34,160 --> 00:05:37,520 Speaker 2: People are buying more products on these two ends of 87 00:05:37,560 --> 00:05:41,640 Speaker 2: the price spectrum, the budget friendly private label products that 88 00:05:41,720 --> 00:05:45,240 Speaker 2: stores like Walgreens and Costco and your neighborhood grocery store offer, 89 00:05:45,920 --> 00:05:47,480 Speaker 2: and the premium stuff. 90 00:05:47,760 --> 00:05:52,120 Speaker 1: Maybe I'll trade down to the Kroger brand of soap 91 00:05:52,279 --> 00:05:56,560 Speaker 1: instead of Dawn, or maybe I'll spend more money for 92 00:05:56,880 --> 00:06:02,159 Speaker 1: a fancier one, like a broader Missus Meyers type brand. 93 00:06:02,560 --> 00:06:06,479 Speaker 2: Leslie says it's not necessarily income that divides the shoppers 94 00:06:06,520 --> 00:06:10,479 Speaker 2: buying premium goods and private label goods. The exact same 95 00:06:10,520 --> 00:06:13,520 Speaker 2: people might be buying things at either end of the spectrum, 96 00:06:13,560 --> 00:06:16,200 Speaker 2: depending on the product, or the time of year, or 97 00:06:16,279 --> 00:06:21,720 Speaker 2: their personal preferences. With limited resources and rising costs, shoppers 98 00:06:21,839 --> 00:06:25,760 Speaker 2: just have to prioritize, and brand names are no longer 99 00:06:26,000 --> 00:06:29,640 Speaker 2: the priority. Shoppers are open to trying new brands in 100 00:06:29,720 --> 00:06:32,719 Speaker 2: ways they maybe haven't been before. It's in part because 101 00:06:32,760 --> 00:06:36,680 Speaker 2: of the global pandemic which turned everyone's consumption habits on 102 00:06:36,720 --> 00:06:37,240 Speaker 2: their heads. 103 00:06:37,480 --> 00:06:41,360 Speaker 1: Because a lot of items were out of stock. Consumers 104 00:06:41,400 --> 00:06:45,520 Speaker 1: were willing to buy anything during these pandemic shortages. So 105 00:06:45,600 --> 00:06:48,440 Speaker 1: maybe they tried a private label they'd never tried before. 106 00:06:48,839 --> 00:06:51,520 Speaker 1: Maybe they splurged, you know, they couldn't go out to 107 00:06:51,560 --> 00:06:54,160 Speaker 1: eat at restaurants, so they were like, Hey, I'm going 108 00:06:54,200 --> 00:06:57,719 Speaker 1: to splurge on this super fancy pasta sauce that I've 109 00:06:57,760 --> 00:07:01,200 Speaker 1: never tried before instead of just buying RAG And they 110 00:07:01,279 --> 00:07:04,880 Speaker 1: loved it. And so people really were open to experimentation 111 00:07:05,480 --> 00:07:08,800 Speaker 1: in ways they hadn't been before during the pandemic, and 112 00:07:08,839 --> 00:07:11,200 Speaker 1: that's driven a lot of the shifts we've seen, and 113 00:07:11,240 --> 00:07:12,400 Speaker 1: those of stock. 114 00:07:12,600 --> 00:07:16,280 Speaker 2: Plus millennials and gen zers just don't shop the same 115 00:07:16,320 --> 00:07:17,160 Speaker 2: way their parents do. 116 00:07:17,640 --> 00:07:20,720 Speaker 1: I think a lot of these big legacy brands that 117 00:07:20,800 --> 00:07:26,560 Speaker 1: maybe the baby boomer generation bought, they're seen maybe by millennials. 118 00:07:27,120 --> 00:07:30,480 Speaker 1: The next generation in younger gen z is kind of 119 00:07:30,520 --> 00:07:33,440 Speaker 1: like these nostalgia brands. So maybe I want to, like, 120 00:07:33,920 --> 00:07:36,160 Speaker 1: you know, eat comfort food once in a while, so 121 00:07:36,240 --> 00:07:39,640 Speaker 1: I'll buy the velveta shells and cheese that my mom 122 00:07:40,000 --> 00:07:43,240 Speaker 1: used to buy regularly for me. But it's not like 123 00:07:43,280 --> 00:07:45,360 Speaker 1: an everyday purchase type of thing. 124 00:07:45,880 --> 00:07:50,360 Speaker 2: Younger generations also have shifting tastes, ones that aren't being 125 00:07:50,400 --> 00:07:53,480 Speaker 2: fully served by these legacy mid tier brands. 126 00:07:53,880 --> 00:07:58,240 Speaker 1: They want to like try different things. They're more into intense, bold, 127 00:07:58,440 --> 00:08:02,360 Speaker 1: spicy flavors. And now we're seeing even like ones that 128 00:08:02,440 --> 00:08:06,679 Speaker 1: had been considered more premium get out premiumed by newer, 129 00:08:06,800 --> 00:08:10,720 Speaker 1: younger hipper brands like Annie's Macaroni and Cheese, the organic 130 00:08:10,760 --> 00:08:13,680 Speaker 1: brand that kind of used to be the premium brand. 131 00:08:13,720 --> 00:08:18,480 Speaker 1: But now this new company called Goodles or Goodles however 132 00:08:18,520 --> 00:08:22,760 Speaker 1: you want to pronounce it has like really bright neon 133 00:08:22,880 --> 00:08:27,640 Speaker 1: packaging and they have all sorts of flavors. They have truffle, 134 00:08:28,000 --> 00:08:32,640 Speaker 1: they have bacon, they have white cheddar of course parmesan. 135 00:08:33,559 --> 00:08:39,040 Speaker 1: And younger people and families, people with kids, they're really 136 00:08:39,400 --> 00:08:42,000 Speaker 1: flocking to this brand and they're showing they're willing to 137 00:08:42,040 --> 00:08:44,400 Speaker 1: pay more for it. And it's not just the packaging 138 00:08:44,480 --> 00:08:49,000 Speaker 1: and the flavors. It's a so called quality thing because 139 00:08:49,080 --> 00:08:53,880 Speaker 1: this macaroni and cheese has higher protein, higher fiber than 140 00:08:54,240 --> 00:08:56,760 Speaker 1: like a traditional craft or something like that. 141 00:08:58,120 --> 00:09:01,120 Speaker 2: So how do the craft of the world win back 142 00:09:01,160 --> 00:09:05,760 Speaker 2: their customers. Can the middle make a comeback that's coming up. 143 00:09:15,920 --> 00:09:19,600 Speaker 2: When it comes to consumer tastes, Bloomberg's Leslie Patten knows 144 00:09:19,640 --> 00:09:22,800 Speaker 2: that fads can come and go. Part of what makes 145 00:09:22,800 --> 00:09:25,120 Speaker 2: a box of Kraft mac and cheese so appealing is 146 00:09:25,160 --> 00:09:29,200 Speaker 2: that it's consistent. But as younger, price sensitive and quality 147 00:09:29,200 --> 00:09:33,800 Speaker 2: conscious generations start leaning towards different products, these legacy brands 148 00:09:33,840 --> 00:09:35,240 Speaker 2: are having to meet the moment. 149 00:09:35,840 --> 00:09:38,880 Speaker 1: We're not necessarily going to see Kraft mac and cheese 150 00:09:38,920 --> 00:09:42,240 Speaker 1: like disappear from the shelves, but it is, you know, 151 00:09:42,320 --> 00:09:46,439 Speaker 1: having a sales impact on them, and the companies are responding. 152 00:09:46,840 --> 00:09:49,640 Speaker 2: When you look at how these companies are trying to adapt, 153 00:09:50,120 --> 00:09:53,920 Speaker 2: are they mostly trying to change their branding or creating 154 00:09:53,960 --> 00:09:55,440 Speaker 2: new products entirely? 155 00:09:56,000 --> 00:09:58,440 Speaker 1: I think from the examples I've seen, they're trying to 156 00:09:58,480 --> 00:10:04,000 Speaker 1: take existing items and make them more premium, try to 157 00:10:04,040 --> 00:10:07,480 Speaker 1: take them up market in some way create a new 158 00:10:07,520 --> 00:10:08,960 Speaker 1: benefit for consumers. 159 00:10:09,280 --> 00:10:13,079 Speaker 2: New benefits like a Boulder Taste. 160 00:10:12,720 --> 00:10:16,520 Speaker 1: Craft macaroni and cheese, whose sales have been down in 161 00:10:16,600 --> 00:10:22,040 Speaker 1: the past year. They've been trying to hook younger shoppers 162 00:10:22,080 --> 00:10:26,240 Speaker 1: with like new flavors. There's a jalapeno mac and cheese. 163 00:10:26,320 --> 00:10:30,000 Speaker 1: Now there's a ranch mac and cheese now, so really 164 00:10:30,040 --> 00:10:32,920 Speaker 1: dialing up kind of the spice. 165 00:10:32,360 --> 00:10:35,720 Speaker 2: So they're mostly reaching up rather than down. They're trying 166 00:10:35,720 --> 00:10:39,840 Speaker 2: to turn premium rather than compete with those cheaper private labels. 167 00:10:40,080 --> 00:10:42,120 Speaker 1: I think that's right. You have to be really careful 168 00:10:42,120 --> 00:10:44,080 Speaker 1: when you innovate on the value side with a well 169 00:10:44,120 --> 00:10:48,480 Speaker 1: known brand, because you can dilute the brand to people, 170 00:10:48,880 --> 00:10:51,520 Speaker 1: you can make it a less attractive brand. So like 171 00:10:51,600 --> 00:10:54,960 Speaker 1: if you have Bounty paper towels, you know, if you 172 00:10:55,080 --> 00:10:58,880 Speaker 1: have a cheap inversion of Bounty, that kind of lessens 173 00:10:58,880 --> 00:10:59,720 Speaker 1: the brand to people. 174 00:11:00,000 --> 00:11:03,200 Speaker 2: And the brand is everything. If you don't know what 175 00:11:03,320 --> 00:11:05,079 Speaker 2: kind of quality you're going to get when you buy 176 00:11:05,160 --> 00:11:10,400 Speaker 2: a roll of Bounty paper towels, why buy Bounty. A 177 00:11:10,440 --> 00:11:13,120 Speaker 2: particularly weird quirk about all of this is that some 178 00:11:13,200 --> 00:11:16,840 Speaker 2: of these big companies own multiple brands at different price points, 179 00:11:17,040 --> 00:11:20,079 Speaker 2: targeting different customers, so they can try to market their 180 00:11:20,200 --> 00:11:23,440 Speaker 2: middle products to more premium customers, but then they risk 181 00:11:23,520 --> 00:11:28,840 Speaker 2: cannibalizing sales from their premium products. Take diapers, for example. 182 00:11:28,920 --> 00:11:32,520 Speaker 1: Loves Diapers had been losing market share for a long time, 183 00:11:32,800 --> 00:11:36,480 Speaker 1: and they recently just launched a new and improved line 184 00:11:36,600 --> 00:11:40,439 Speaker 1: of love stapers that it's called Love's Platinum. They're saying 185 00:11:40,480 --> 00:11:44,920 Speaker 1: these are their softest diapers ever, and they have twelve 186 00:11:44,960 --> 00:11:49,480 Speaker 1: hour absorbency, and they're charging a premium for two. They 187 00:11:49,600 --> 00:11:51,560 Speaker 1: raise the prices on it. But at the same time, 188 00:11:51,720 --> 00:11:54,640 Speaker 1: like Procter and Gamble, the maker of Loves has to 189 00:11:54,679 --> 00:11:57,920 Speaker 1: be kind of careful because they also own the premium 190 00:11:58,000 --> 00:11:59,679 Speaker 1: line of Pampers. 191 00:12:00,440 --> 00:12:03,400 Speaker 2: Ultimately, a lot of these kinds of shopping choices will 192 00:12:03,440 --> 00:12:06,560 Speaker 2: be left up to personal taste, but Leslie thinks this 193 00:12:06,640 --> 00:12:10,560 Speaker 2: bifurcation is likely to continue. And as I can attest, 194 00:12:10,880 --> 00:12:13,440 Speaker 2: paying more for mac and cheese doesn't mean you're gonna 195 00:12:13,520 --> 00:12:16,760 Speaker 2: like it more. Leslie's family has figured this out too. 196 00:12:17,080 --> 00:12:19,880 Speaker 1: I actually made my kids do the taste test on 197 00:12:20,000 --> 00:12:22,360 Speaker 1: macaroni and cheese. I have three kids. I made them 198 00:12:22,440 --> 00:12:26,880 Speaker 1: do like private label Craft I think, and then the 199 00:12:26,920 --> 00:12:30,520 Speaker 1: good Oles brand, and I got answers all over the place. 200 00:12:30,559 --> 00:12:32,360 Speaker 1: One of them was like, I like Craft best, and 201 00:12:32,400 --> 00:12:34,320 Speaker 1: one of them was like, I like this other stuff. 202 00:12:34,360 --> 00:12:36,760 Speaker 1: And then my daughter liked the good Oles brand, which 203 00:12:36,840 --> 00:12:39,480 Speaker 1: is kind of like, oh, well, then why would I 204 00:12:39,559 --> 00:12:42,800 Speaker 1: buy the mainstream brand. I should either trade up and 205 00:12:42,840 --> 00:12:46,640 Speaker 1: give them some protein, or trade down and save some money, or. 206 00:12:46,800 --> 00:12:49,600 Speaker 2: You could just buy all three like I did and 207 00:12:49,960 --> 00:12:53,560 Speaker 2: eat mac and cheese for lunch and dinner for the 208 00:12:53,559 --> 00:13:03,160 Speaker 2: rest of the week. Thanks for listening to The Big 209 00:13:03,200 --> 00:13:07,280 Speaker 2: Take from Bloomberg News. I'm Sarah Holder. This episode was 210 00:13:07,280 --> 00:13:10,679 Speaker 2: produced by Julia Press. It was edited by Tracy Samuelson 211 00:13:10,679 --> 00:13:13,920 Speaker 2: and Becca Greenfield. It was mixed by Alex Sugiura and 212 00:13:13,960 --> 00:13:18,440 Speaker 2: fact checked by Adrenatapia. Naomishevin, who also edited this episode, 213 00:13:18,480 --> 00:13:22,160 Speaker 2: is our senior producer. Elizabeth Ponso is our senior editor. 214 00:13:22,600 --> 00:13:26,760 Speaker 2: Nicole Beemsterbor is our executive producer. Sage Bauman is Bloomberg's 215 00:13:26,760 --> 00:13:29,880 Speaker 2: head of podcasts. Please follow and review The Big Take 216 00:13:30,000 --> 00:13:33,000 Speaker 2: wherever you listen to podcasts. It helps new listeners find 217 00:13:33,000 --> 00:13:35,120 Speaker 2: the show. We'll be back tomorrow.