Understanding the value of taste

by Keith Nunes
Share This:

The past two years have been especially challenging for processors of branded fluid milk products. As the economic recession deepened, consumers became increasingly price-sensitive and retailers often used private label fluid milk as a loss leader to attract customers to their stores. As the gap between the price of private label products and their branded counterparts grew, the volume lost by branded manufacturers became more pronounced. While price played a, if not the, primary role in the rise of private label fluid milk purchases, the impact of taste must also be a part of the discussion.

The fact that most consumers do not perceive a difference between the taste and quality of branded milk compared with private label offerings was a primary force in the increase of private label milk sales. This notion was recently borne out in research conducted by the market research firm, Market Force Information Inc., headquartered in Louisville, Colo.

In a survey of 6,100 consumers, Market Force identified a correlation between recognizable brands and consumer satisfaction. Fluid milk was the most popular of the private label categories studied by Market Force. Eighty-four per cent of study participants knew the grocery store where they shop sells private label milk, 20% said they buy it “all of the time” and 45% said they buy it “some of the time.” Taste did not play a significant role in purchase preference, with only 7% of study participants citing it as a factor in their milk purchasing decisions.

The results for fluid milk stands in stark contrast to consumer perception of snacks and cereals, according to the study. More than half of survey respondents said they never purchase private label snacks, citing taste as the primary reason. More than 29% of the survey participants said they never purchase private label cereal, and taste was again the primary reason given for not making a purchase.

In his annual letter to shareholders, Gregg Engles, the chairman and chief executive officer of Dean Foods Co., the nation’s largest fluid milk processor, called 2010 “The most difficult year in Dean Foods history.” He highlighted the strategies utilized by retailers to drive store traffic and consumer willingness to trade down to private label brands as key reasons for his company’s financial struggles, but added that he viewed these dynamics to not only be challenging, but enduring.

“We have seen a fundamental reset of consumer value expectations — we believe this is the new normal,” he wrote. “That means our business must learn to succeed regardless of market conditions and to thrive in a climate of adversity.”

Milk, a single ingredient product (difficult, but not impossible to differentiate), may be an extreme example, but Mr. Engles’ sentiments are sound advice for all manufacturers of branded food and beverage products. The economic recession has led to a renaissance for the private label marketplace, and as input and energy prices remain volatile, a large segment of consumers will continue to focus on value. If branded marketers wish to maintain or enhance their positions in the market they must continue to innovate.

Food and beverage manufacturers that sell branded products will be challenged to innovate with an eye toward remaining price competitive. Today, innovation is often defined as the addition of a desirable product attribute or the removal of an ingredient that may be perceived in a negative light. Another option is to extend product lines using new flavor profiles.

As the Market Force survey shows, in many product categories taste trumps value as long as consumers perceive a difference. Maintaining that perception will be paramount as the economy, energy and food costs continue to pressure consumer purchasing patterns.

Comment on this Article
We welcome your thoughtful comments. Please comply with our Community rules.

The views expressed in the comments section of Food Business News do not reflect those of Food Business News or its parent company, Sosland Publishing Co., Kansas City, Mo. Concern regarding a specific comment may be registered with the Editor by clicking the Report Abuse link.