The food business is in transition, with mega-brands such as Kraft, General Mills and Campbell Soup struggling to hold on to market share at mainstream grocery stores. Shoppers are increasingly gravitating up-market to gourmet “fresh format” stores, and down-market to booming discount chains such as Dollar Tree and Dollar General.
It’s in the latter category that these companies see the most potential for growth as low-income, immigrant and young shoppers look for deep bargains in the post-recession economy.
For instance, Kraft’s Velveeta individual cheese-sauce servings haven’t been selling well in traditional groceries. But the company decided not to pull them from the market because they do extremely well in discount dollar-stores because of their low price-point.
“The growth in the industry is really in dollar- and limited-assortment stores,” says Jim Hertel at grocery consultancy Willard Bishop. “And it’s in more upscale types of food retailers, like Whole Foods.”
Kraft’s flagship brands — like Oscar Mayer, Kool Aid, Maxwell House and Velveeta — aren’t likely to be taken up by upscale consumers. Velveeta is perfect for penetrating the discount-food market, says Michael Stern, co-author of the Roadfood.com books about American vernacular cuisine and a regular commentator on public radio’s ‘The Splendid Table.”
“It’s cheap, and it’s very easy,” Stern says. “I always have Velveeta in my refrigerator. A cheeseburger is not a cheeseburger without Velveeta. It’s so glossy, so smooth.”
“Cheap” and “easy” are two qualities that Hertel says consumers put a premium on when filling their shopping carts at discount stores.