How Prices are Changing in Your Grocery Store, and Why This One Frugality Hack No Longer Works

Something has changed in the grocery store pricing environment. And it's not just prices rising (which they are, across the board in almost all food categories).

What we're also seeing is a fundamental change in the way things are priced relative to each other, and it's ruining one of the key grocery store hacks frugal shoppers have used for years.

What's the fundamental change? It used to be that store-brand products always sold at meaningful discounts to branded products. Not any more. And so, one of the easiest ways to save money food shopping--switching from the branded to the generic product--no longer works as well as it used to.

The backstory
Consumers were a lot better behaved twenty years ago. They didn't change brands often. So, to induce the typical consumer to even consider buying a store brand or generic product, the store had to offer a really juicy price. The price discount had to be huge.

Remember, this was back when companies actually made things, and when there (sometimes) used to be an actual difference between branded and unbranded products. Not so much any more. Furthermore, if you've read any of Casual Kitchen's posts on branding, you're well aware that, today, many consumer products brands don't actually make the products they're known for. They instead outsource it to other third party food manufacturers.

Not only that, but often those third party manufacturers make not only the branded item, but the store brand product too. Often in the very same factory. And those two products sit right next to each other on the store shelf, differentiated by absolutely nothing but price. [For a depressing and highly typical example, see CK's article on commodity canned tuna.]

Consumers, especially the ones who didn't enjoy getting separated from their money for no reason, caught on to this game. They stopped playing checkers and started playing chess. When you figure out to your dismay that the only difference between a branded product and a store brand product is a label and a 30-50% higher price, you won't just consider the store brand, you'll buy it. From now on. What kind of fool would do otherwise?

Add in some inflation
There's one more step in this discussion. We're now in a more inflationary environment than we were just a few years ago. Prices are starting to rise across many grocery store categories. But here's what's unusual in today's pricing environment: while many branded products have hiked their prices, store brands have hiked their prices even more. Now, the pricing differential between branded and generic items is a lot smaller than it was. Instead of discounts of 30% or more, you might see discounts of as little as 5-10%.

I'll share an example. Over the past couple of years, Planters brand nuts has put in meaningful price hikes to the point where (in grocery stores in our area) their standard 1-lb jar of peanuts now costs up to $4.29. The store brand in my store responded to this "pricing umbella" by raising their standard price to $3.99, a mere 7% discount. Yes, both have raised prices, but the store brand raised its price more, and now the store band offers far less of a discount to the branded product than before.

Another example. Store brand analgesics (aspirin, ibuprofen, acetaminophen) now are priced at a smaller than ever discount to branded analgesics, with discounts of only 10-15%. Previously you could buy store brand painkillers for sometimes half the price of branded Tylenol or Advil. And because these products have to be identical in every way by law, this was the easiest, most entry-level frugality hack in all of consumer products.

As a matter of fact, with some products, the generic/branded pricing differential has gotten so tiny that you can sometimes find a branded product offered at a temporary "on-sale" price that's actually less than the store brand product! Grocery store reality seems totally upside down when this happens. More on this in two paragraphs.

You can only push consumers so far
Finally, you can only push prices so far before consumers push back. In many food categories, companies and grocery stores are discovering to their dismay that they hurt sales by ramming through big price hikes, as consumers adjust by finding substitutes or buying less. Then, to win those buyers back, consumer products companies rely on discounting, sales and couponing.

Here's a somewhat ludicrous example of this from the packaged cookie aisle: after years and years of price hikes and stealth price hikes (keeping the price the same but offering fewer cookies per box, one of the most annoying tactics out there), it feels ridiculous to pay $6.00 or more for a box of some 17 Oreo DoubleStuff cookies, a quantity of cookies I could easily inhale in one sitting. Apparently many consumers agree with me (maybe not about the inhaling part, but definitely about the price), and in my grocery store, these cookies are frequently offered at half off. Half!

So, let me offer readers a thought experiment. What really is the price of Oreos?

Obviously, for a non-savvy, non-flexible customer who must have her Oreos on the exact day she happens to shop… that day's price is the price, however high it happens to be.

For the rest of us, however, we easily defeat these pricing games by shopping opportunistically, and never paying full price for anything, ever. Ever! Unless something is offered at a highly desirable, on-sale price, we. don't. buy. Here's where a savvy consumer separates herself from the pack.

Or! An even savvier, self-reliant consumer can always use the Don't want it! technique and not buy Oreos at all. After all, a batch of homemade cookies--made with love from laughably cheap commodity pantry items--will taste far better and cost far less.

And because learning to make delicious food at home is an inherently good skill, and because working on this skill improves your independence, flexibility and self-sufficiency, doing so will bring you far more satisfaction than overpaying for some flimsy, pathetic plastic container of 17 lousy Oreos.

So what's the takeaway here? First, all of this goes to show, yet again, who has ultimate power in this business environment. We consumers do. We are the ones who willingly decide whether or not to pick the product up off the shelf, carry it over to the checkout counter, and fish money out of our pockets to pay. By definition, companies cannot sell us products at any price unless they offer sufficient value to us such that we decide to buy.

The minute we say no and don't buy... they start discounting. Then we buy.

The consumer products marketplace is changing, it's evolving, as companies seek ways to maintain their profitability in an increasingly uncertain retailing environment. Some of our favorite frugality techniques still work, but some aren't working quite as well as they used to. We have to stay flexible, independent and opportunistic.

READ NEXT: Why Bad Blogs Get More Readers (An Accidental, Secret Recipe for Massive Web Traffic)
AND: Nine Terrible Ways to Make Choices

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1 comment:

Marcia said...

I've noticed this especially with things like canned beans. My grocery shopping habits have changed a lot over the last few years though, so much that it doesn't really matter.

For awhile, I cooked beans from dried. I'm still experimenting with that, but for the most part - husband prefers canned beans because of the effects of dried beans on his digestion. (Even well-soaked pressure cooked beans.) So, I've found that I can get canned beans on sale pretty regularly. If not, Trader Joe's canned beans are always cheaper than the grocery store.

As far as everything else goes, I've been aiming to generate less waste. I get nearly all my produce locally, from two different services that deliver in a box. When I buy condiments, I aim as much as possible for glass, which is infinitely recyclable. Dried lentils, nuts, seeds, and grain come from bulk bins at Sprouts. 90% of the time, I wait for a sale - but if I'm out of oats, I'll happily pay $0.99/lb instead of waiting for $0.69.

I'm probably not the grocery stores' favorite shopper, that's for sure! At this point in my life, I've given up on reducing my grocery bill "as much as possible". Just not worth it to me anymore.