Cost-of-living crisis giving home brands a boost

More people are snapping up home brand products due to the rising cost of living, new research shows.

EY’s latest Future Consumer Index research shows the perceived quality of supermarkets’ own brands has increased.

This, paired with the cheaper price tag, has boosted customers’ willingness to purchase non-branded products, particularly in the food and grocery sector, with 65% of respondents saying store brand products satisfied their needs as much as branded products.

Michael Summer-Gervai, customer and growth lead at EY New Zealand, said over the past couple of years New Zealanders’ perception of the quality of home brands had increased significantly.

“People used to think that the cheaper price tag came with a lesser quality but that has changed.”

EY’s consumer index found more than half of New Zealanders thought private label and store brands were increasingly offering better quality products. High-income respondents in particular (62%) found this to be true.

“Given the current economic environment, customers have increasingly been switching to home brands to save money, and as they have done so they have found these own labels satisfy their needs just as well as branded products do.”

Gen Z were a lot less willing to buy branded products, particularly when it came to categories such as technology and beauty.

As one example, 30% of Gen Z would buy a store brand for beauty and cosmetic products, whereas only 23% of Baby Boomers, 28% of Gen X and 26% of Millennials would.

“This is something that both brands and retailers are going to need to adjust to as this group becomes the main driver of household spend over the next decade or so.”

There was now an opportunity for brands to re-evaluate what their point of difference was and how they served customers, Summer-Gervai said.

“As factors driving purchasing decisions evolve, the opportunity for retailers is to make sure they understand the needs of their customers.

“The economy follows a cyclic pattern and although we’re in a trough right now, it will peak again. So, while it is a matter of riding out the cost-of-living crisis to some extent, retailers and brands should also be prepared for more conservative spending habits to stick around.

“The biggest risk for retailers would be to only stock premium brands in the hope consumer behaviour returns to normal, only to find the cost-of-living crisis has changed some customers’ taste preferences for good.”

Professor of marketing at Victoria University Nick Ashill said the trend was also happening internationally.

“Interestingly, there is also academic research to suggest that premium brands can actually grow during an economic recession, which seems somewhat counterintuitive.

“But this is largely for consumers whose income levels are higher and more cushioned from the cost of living crisis. In marketing research, we refer to a theory known as hedonic consumption, where people buy products to provide a pleasurable experience.

“There is evidence to suggest that this desire does not drop during an economic downturn.”