Grocery Shoppers Turn to Discount Stores, Private Labels to Save

Prices are up 6.4% over 2020—the largest 12-month increase in more than a decade.

December 17, 2021

Grocery Shopping

NEW YORK—The rise in grocery costs has forced some Americans to change how and where they shop, reports CNN. With grocery prices 6.4% higher than this time in 2020, shoppers are buying less and opting for cheaper brands, including private-label brands.

In September, Numerator found that 20% of those surveyed said they would switch to cheaper brands if prices continued to rise, while 17% said they would switch retailers, and 10% said they would buy less frequently.

Sales volume in 78% of the top 100 food categories fell during the four weeks ended November 28 from the same period a year ago, according to IRI data. The products that declined in sales volume the most were breakfast meats, milk, eggs, cereal, ice cream, fresh bread, seafood and wine.

According to IRI’s KK Davey, customers have managed the rise in prices in the past by buying fewer prepared meals and deserts, stocking up at the beginning of the month and shopping more at discount chains.

One woman interviewed by CNN said she has started shopping more frequently at Dollar General for basic meats, dairy and eggs. The prices “are a little bit cheaper, but still not as cheap as I'd like them to be," she said.

Customers "are feeling the inflation," said Dollar Tree CEO Michael Witynski on an analyst call last month. "I think right now, more than ever, they are going to be relying on great value."

Food is more expensive than it has been in decades, according to CNN. Restaurant prices rose 5.8% over the 12 months ending in November without seasonal adjustments, according to the Bureau of Labor Statistics—the largest 12-month increase since the year ended January 1982. With grocery prices 6.4% higher than the same period in 2020, it’s the largest 12-month increase since December 2008. Beef had the most dramatic increase with a 20.9% spike in prices.

According to 7-Eleven, about eight out of every 10 Americans buy private-brand products to save money. Millennials have a particular affinity for the value and quality that the brands offer, the chain said, and are contributing to the growing popularity of retailer brands.

The opportunity for improved profits is a big motivator for retailers considering private-label products. “In some cases, margins could be 25% versus 18% for a national brand,” said Roy Strasburger, president of StrasGlobal, in a recent NACS Magazine article on private labels. Marketing and promotional control over the brands is another benefit, allowing c-stores to become destinations for products not available anywhere else.