Stocks that will benefit as consumers trade down to store brands.
Shoppers are essentially creatures of habit, but after two years of rising prices, a larger shift to private-label brands is underway. Inflation doesn’t appear to go down anytime soon, although price increases have subsided since the June 2022 peak. Rising housing prices accounted for about half of the monthly increase, and food prices also remained elevated.
"Inflation has shredded household budgets over the past two years, not just when it comes to one-off discretionary expenses or special occasions, but for keeping up with day-to-day bills. Until inflation returns to the 2% neighborhood, pressure on household finances will continue,” Bankrate chief financial analyst Greg McBride said in a note following the CPI release.
Some 60% of consumers said they would likely reduce spending over the because of inflation over the next six months, a recent survey by Morgan Stanley discovered. Removing a more expensive brand for a cheaper option, is one way to trade down. About onethird of U.S. consumers are changing to less costly proteins and purchasing store brands. This is good news for store brands, otherwise known as private labels. Total store unit sales of private labels have increased to 22.5%
of overall purchases , with most of the tick-up happening in the back half of 2022, according to market research company IRI.
Big box retailers like Walmart, Target, and Costco all have private label brands that can help them weather buyer's pivots. This is where I'll put my bets until further notice.