Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: The other day, I got three boxes of mac and
Speaker 2: cheese from my local grocery store, a ninety nine cent
Speaker 2: store brand box, a classic one ninety nine box of Craft,
Speaker 2: and a fancy new option something called Goodles or Goodles
Speaker 2: for four ninety nine. This says it has protein in it,
Speaker 2: fiber in it, and twenty one nutrients from plants. We
Speaker 2: wanted to see what the real difference was, so we
Speaker 2: boiled them up. Let's start with a generic. It's looking gloopy.
Speaker 2: It's looking gloppy. It's looking exactly the same as Craft
Speaker 2: for ninety nine cents. I was impressed. It's really good.
Speaker 2: It's really hearty, better than I expected when I saw
Speaker 2: the box, and it looked like something someone on like
Speaker 2: Microsoft Paint created for a dollar more. The box of
Speaker 2: Craft had a slightly thinner sauce, a less aggressively orange color,
Speaker 2: but it also tastes really good.
Speaker 1: It's cheese and it's noodles, and.
Speaker 2: The premium brand Goodles for an extra four dollars. This
Speaker 2: is too fancy for me. I guess it has more
Speaker 2: protein in it, but I'm not really going to my
Speaker 2: macaroni and cheese for its protein potential or its nutrients.
Speaker 2: Our taste test revealed that for a cheese and noodle meal,
Speaker 2: between the store brand and the Craft, it was a
Speaker 2: toss up. These macaronis are very similar. I could spend
Speaker 2: ninety nine cents on dinner and be perfectly satisfied. There
Speaker 2: are so many options when you walk down a grocery
Speaker 2: store aisle nowadays, so many price points and package colors
Speaker 2: and new and improved flavor buzzwords, so many choices shoppers
Speaker 2: have to make. A new Bloomberg reporting has found that
Speaker 2: consumers are increasingly choosing the low cost and premium brands.
Speaker 2: Those steady legacy mid tier brands like Craft are losing
Speaker 2: out today on the show as more customers try to
Speaker 2: save a buck or level up. Brands in the middle
Speaker 2: are feeling the squeeze. What's causing this problem for mid
Speaker 2: tier brands and how will the trend transform what's on
Speaker 2: our shelves? This is the big take from Bloomberg News.
Speaker 2: I'm Sarah Holder. For decades, shoppers scanning shelves in the
Speaker 2: grocery aisles had a pretty clear calculus they used to
Speaker 2: choose what brand to buy.
Speaker 1: There was more of an affinity for big national brands.
Speaker 2: Leslie Patten covers consumer brands for Bloomberg News.
Speaker 1: Those were the brands they knew and had learned to
Speaker 1: love after lots and lots of marketing by these big companies,
Speaker 1: like a craft Heinz company. It was important to them
Speaker 1: to stock house with Hellman's mayonnaise, with tied laundry detergent,
Speaker 1: with specific brands. It was like a status symbol.
Speaker 2: These weren't the budget options, but they weren't the most
Speaker 2: expensive things on the shelves either. Maybe you think of
Speaker 2: them as legacy brands, we'll call them middle brands. Over
Speaker 2: the past few years, Leslie says, the calculus around what
Speaker 2: brands to buy has started to shift.
Speaker 1: Private label, so items made and sold by the actual retailer,
Speaker 1: the store that has the location, like a Walmart or
Speaker 1: a Target. Those have been gaining share for a while now.
Speaker 1: But I think really what's happened recently is some of
Speaker 1: these national brands have started to struggle. According to data
Speaker 1: that I've.
Speaker 2: Looked at, what is that data tell you?
Speaker 1: There's actually five categories that I've looked at. There's private label,
Speaker 1: which is the store brand. There's value items, which are
Speaker 1: the cheaper ones. There's mainstream national brands, there's premium, and
Speaker 1: then there's super premium, which is even higher price than
Speaker 1: the premium. And the data I have shows that for
Speaker 1: this year through mid July, private label premium and super
Speaker 1: premium sales volumes are up, but value in mainstream those
Speaker 1: are items that are produced by big, big companies like
Speaker 1: Procter and Gamble or a craft Hinds, those sales units
Speaker 1: are down for the same time. So that shows you
Speaker 1: right there we have growth at the two ends of
Speaker 1: the spectrum and a shrinking middle.
Speaker 2: The biggest reason for these changes is a familiar one, inflation.
Speaker 1: Just the persistent price increases we've seen over the.
Speaker 3: Past three or four years has prompted shoppers to just
Speaker 3: be more discerning, to think a little more about what
Speaker 3: they're spending their money on, and lower to middle income.
Speaker 1: Shoppers are making choices. They're saying, is this something that's
Speaker 1: really worth me? Split on. Maybe it is if it's
Speaker 1: for my child or for my health or something like that,
Speaker 1: but like maybe I can trade down in other categories
Speaker 1: that are considered more of like a staple item, you know,
Speaker 1: rice or maybe dish soap. I talked to the head
Speaker 1: of the Private Label Manufacturers Association, and she said, you know,
Speaker 1: people used to be a shame to have a bottle
Speaker 1: of Kirkland from Costco brand, you know, shampoo or shower
Speaker 1: gel in their bathroom. That's not the case anymore.
Speaker 2: People are buying more products on these two ends of
Speaker 2: the price spectrum, the budget friendly private label products that
Speaker 2: stores like Walgreens and Costco and your neighborhood grocery store offer,
Speaker 2: and the premium stuff.
Speaker 1: Maybe I'll trade down to the Kroger brand of soap
Speaker 1: instead of Dawn, or maybe I'll spend more money for
Speaker 1: a fancier one, like a broader Missus Meyers type brand.
Speaker 2: Leslie says it's not necessarily income that divides the shoppers
Speaker 2: buying premium goods and private label goods. The exact same
Speaker 2: people might be buying things at either end of the spectrum,
Speaker 2: depending on the product, or the time of year, or
Speaker 2: their personal preferences. With limited resources and rising costs, shoppers
Speaker 2: just have to prioritize, and brand names are no longer
Speaker 2: the priority. Shoppers are open to trying new brands in
Speaker 2: ways they maybe haven't been before. It's in part because
Speaker 2: of the global pandemic which turned everyone's consumption habits on
Speaker 2: their heads.
Speaker 1: Because a lot of items were out of stock. Consumers
Speaker 1: were willing to buy anything during these pandemic shortages. So
Speaker 1: maybe they tried a private label they'd never tried before.
Speaker 1: Maybe they splurged, you know, they couldn't go out to
Speaker 1: eat at restaurants, so they were like, Hey, I'm going
Speaker 1: to splurge on this super fancy pasta sauce that I've
Speaker 1: never tried before instead of just buying RAG And they
Speaker 1: loved it. And so people really were open to experimentation
Speaker 1: in ways they hadn't been before during the pandemic, and
Speaker 1: that's driven a lot of the shifts we've seen, and
Speaker 1: those of stock.
Speaker 2: Plus millennials and gen zers just don't shop the same
Speaker 2: way their parents do.
Speaker 1: I think a lot of these big legacy brands that
Speaker 1: maybe the baby boomer generation bought, they're seen maybe by millennials.
Speaker 1: The next generation in younger gen z is kind of
Speaker 1: like these nostalgia brands. So maybe I want to, like,
Speaker 1: you know, eat comfort food once in a while, so
Speaker 1: I'll buy the velveta shells and cheese that my mom
Speaker 1: used to buy regularly for me. But it's not like
Speaker 1: an everyday purchase type of thing.
Speaker 2: Younger generations also have shifting tastes, ones that aren't being
Speaker 2: fully served by these legacy mid tier brands.
Speaker 1: They want to like try different things. They're more into intense, bold,
Speaker 1: spicy flavors. And now we're seeing even like ones that
Speaker 1: had been considered more premium get out premiumed by newer,
Speaker 1: younger hipper brands like Annie's Macaroni and Cheese, the organic
Speaker 1: brand that kind of used to be the premium brand.
Speaker 1: But now this new company called Goodles or Goodles however
Speaker 1: you want to pronounce it has like really bright neon
Speaker 1: packaging and they have all sorts of flavors. They have truffle,
Speaker 1: they have bacon, they have white cheddar of course parmesan.
Speaker 1: And younger people and families, people with kids, they're really
Speaker 1: flocking to this brand and they're showing they're willing to
Speaker 1: pay more for it. And it's not just the packaging
Speaker 1: and the flavors. It's a so called quality thing because
Speaker 1: this macaroni and cheese has higher protein, higher fiber than
Speaker 1: like a traditional craft or something like that.
Speaker 2: So how do the craft of the world win back
Speaker 2: their customers. Can the middle make a comeback that's coming up.
Speaker 2: When it comes to consumer tastes, Bloomberg's Leslie Patten knows
Speaker 2: that fads can come and go. Part of what makes
Speaker 2: a box of Kraft mac and cheese so appealing is
Speaker 2: that it's consistent. But as younger, price sensitive and quality
Speaker 2: conscious generations start leaning towards different products, these legacy brands
Speaker 2: are having to meet the moment.
Speaker 1: We're not necessarily going to see Kraft mac and cheese
Speaker 1: like disappear from the shelves, but it is, you know,
Speaker 1: having a sales impact on them, and the companies are responding.
Speaker 2: When you look at how these companies are trying to adapt,
Speaker 2: are they mostly trying to change their branding or creating
Speaker 2: new products entirely?
Speaker 1: I think from the examples I've seen, they're trying to
Speaker 1: take existing items and make them more premium, try to
Speaker 1: take them up market in some way create a new
Speaker 1: benefit for consumers.
Speaker 2: New benefits like a Boulder Taste.
Speaker 1: Craft macaroni and cheese, whose sales have been down in
Speaker 1: the past year. They've been trying to hook younger shoppers
Speaker 1: with like new flavors. There's a jalapeno mac and cheese.
Speaker 1: Now there's a ranch mac and cheese now, so really
Speaker 1: dialing up kind of the spice.
Speaker 2: So they're mostly reaching up rather than down. They're trying
Speaker 2: to turn premium rather than compete with those cheaper private labels.
Speaker 1: I think that's right. You have to be really careful
Speaker 1: when you innovate on the value side with a well
Speaker 1: known brand, because you can dilute the brand to people,
Speaker 1: you can make it a less attractive brand. So like
Speaker 1: if you have Bounty paper towels, you know, if you
Speaker 1: have a cheap inversion of Bounty, that kind of lessens
Speaker 1: the brand to people.
Speaker 2: And the brand is everything. If you don't know what
Speaker 2: kind of quality you're going to get when you buy
Speaker 2: a roll of Bounty paper towels, why buy Bounty. A
Speaker 2: particularly weird quirk about all of this is that some
Speaker 2: of these big companies own multiple brands at different price points,
Speaker 2: targeting different customers, so they can try to market their
Speaker 2: middle products to more premium customers, but then they risk
Speaker 2: cannibalizing sales from their premium products. Take diapers, for example.
Speaker 1: Loves Diapers had been losing market share for a long time,
Speaker 1: and they recently just launched a new and improved line
Speaker 1: of love stapers that it's called Love's Platinum. They're saying
Speaker 1: these are their softest diapers ever, and they have twelve
Speaker 1: hour absorbency, and they're charging a premium for two. They
Speaker 1: raise the prices on it. But at the same time,
Speaker 1: like Procter and Gamble, the maker of Loves has to
Speaker 1: be kind of careful because they also own the premium
Speaker 1: line of Pampers.
Speaker 2: Ultimately, a lot of these kinds of shopping choices will
Speaker 2: be left up to personal taste, but Leslie thinks this
Speaker 2: bifurcation is likely to continue. And as I can attest,
Speaker 2: paying more for mac and cheese doesn't mean you're gonna
Speaker 2: like it more. Leslie's family has figured this out too.
Speaker 1: I actually made my kids do the taste test on
Speaker 1: macaroni and cheese. I have three kids. I made them
Speaker 1: do like private label Craft I think, and then the
Speaker 1: good Oles brand, and I got answers all over the place.
Speaker 1: One of them was like, I like Craft best, and
Speaker 1: one of them was like, I like this other stuff.
Speaker 1: And then my daughter liked the good Oles brand, which
Speaker 1: is kind of like, oh, well, then why would I
Speaker 1: buy the mainstream brand. I should either trade up and
Speaker 1: give them some protein, or trade down and save some money, or.
Speaker 2: You could just buy all three like I did and
Speaker 2: eat mac and cheese for lunch and dinner for the
Speaker 2: rest of the week. Thanks for listening to The Big
Speaker 2: Take from Bloomberg News. I'm Sarah Holder. This episode was
Speaker 2: produced by Julia Press. It was edited by Tracy Samuelson
Speaker 2: and Becca Greenfield. It was mixed by Alex Sugiura and
Speaker 2: fact checked by Adrenatapia. Naomishevin, who also edited this episode,
Speaker 2: is our senior producer. Elizabeth Ponso is our senior editor.
Speaker 2: Nicole Beemsterbor is our executive producer. Sage Bauman is Bloomberg's
Speaker 2: head of podcasts. Please follow and review The Big Take
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Speaker 2: the show. We'll be back tomorrow.