Due to price, many food brands satisfy less

November 16, 2010

Food brands have certainly felt the sting of private label encroachment the past couple of years.

Food brands have certainly felt the sting of private label encroachment the past couple of years. But it is about more than retailer opportunism – it is the brands themselves that leave the door open to such share loss.

This is one of the lessons of the latest American Customer Satisfaction Index for food brands, released today by ACSI, which was founded at the University of Michigan’s Ross School of Business. In Q3 2010, the index for customer satisfaction with food brands fell for the first time in three years – by 2.4% to an 81 score on a 100-point scale – due primarily to rising food prices, and secondarily to a perception of lesser quality.

The index also measures customer satisfaction with non-durable goods brands in other product classifications. By comparison, that broader index slipped by 0.3% in Q3 2010 to a 75.7 score on a 100-point scale.

So customer satisfaction with food and beverage brands fell more in the latest quarter, but still remains at a higher level than the national index overall.   

These slips in satisfaction followed what ACSI termed as “almost two years of stalling scores.” That’s foreboding for the economy, suggests University of Michigan Professor Claes Fornell, ACSI founder and author of The Satisfied Customer. “Periods of stalling ACSI growth have often been followed by weak, and sometimes negative, GDP growth. Consumer spending is unlikely to exhibit much of an increase unless bond buying by the Federal Reserve leads to more employment, inflation, consumer confidence and higher stock prices. With the drop in ACSI, consumer spending for the final quarter of 2010 does not look like it will improve enough to spur much economic growth.”

Within the food and beverage sector, nine of the 13 largest brand manufacturers posted customer satisfaction declines over the same quarterly period a year ago. For example, Heinz fell 1.1% to 88, but still leads as it has for the past decade. Tied at 86 are Quaker Oats and Hershey (both down 1.1%), and tied at 85 are Mars (down 2.3%) and Sara Lee (unchanged), the index shows.

Tyson experienced the biggest plunge (down 6.1% to 77), and Kellogg was down 4.7% to 81.

ConAgra Foods showed the biggest gain in customer satisfaction. The brand was up 6.4% to 83 on the strength of new value lines and steep discounts on frozen foods, according to ACSI, which noted this figure represented a rebound from its year-earlier decline.