Consumers Are Trading Up, but Are $70 Pickles Worth the Price?
Amid concerns over Ozempic making its way to the underground market, the consumer realm is now experiencing an intriguing upheaval with a shortage of Sriracha.
The scarcity of Sriracha sauce has led to a frenzy among consumers, resulting in skyrocketing prices on eBay, reaching a staggering $70. On the other hand, Amazon has seen even more exorbitant prices, with the condiment soaring up to $124 and becoming entirely unavailable for purchase, leaving us pondering. Who could have made that purchase?
For a few years now, Huy Fong Foods, the company renowned for its iconic rooster-branded Sriracha sauce, has been grappling with an ongoing chili scarcity. This shortage has adversely affected production, occasionally resulting in market shortages.
A quick search on eBay reveals a wide range of prices for various sizes of Sriracha sauce bottles. Prices start at $39.98 for 17-ounce bottles and climb up to nearly $70 for a 28-ounce bottle. It’s important to note that these prices do not include shipping fees.
On Amazon, a seller is advertising a jaw-dropping price of $124 for a 2-pack. However, it remains to be seen if anyone is willing to pay such exorbitant prices, especially considering that a standard 17-ounce bottle typically costs around $5.
In a recent statement given to CNN, Huy Fong Foods confirmed that they are still grappling with a shortage of raw materials. The company acknowledged that while some production resumed during the previous fall season, their supply remains limited, significantly impacting overall production. The spokesperson for Huy Fong mentioned that there are currently no estimates available for when the supply situation is expected to improve.
Huy Fong has been wrestling with a chili pepper shortage for the past three years, leading to an ongoing supply predicament. The scarcity has been so severe that the company temporarily halted orders last year. This shortage of chili peppers has affected the production of Sriracha sauce and Huy Fong’s Chili Garlic, and Sambal Oelek products.
An Opportunity for Private Labels and Others
The private label trend has become quite familiar to us by now. However, whether we’ve reached the peak of private-label products is worth considering. We’ve already normalized in this regard.
While some Sriracha loyalists are undoubtedly willing to pay a premium price for their favorite hot sauce (congratulations to the sellers!), most people would find the price too steep to justify the purchase. The high prices on platforms like eBay may attract a niche group of enthusiasts, collectors, or those seeking a unique gift. However, these prices do not reflect the average consumer’s buying behavior.
That being said, this situation presents an opportunity for other hot sauce brands to shine. For example, Texas Pete Cha Sriracha Hot Chile Sauce, available in a 3-pack on Amazon, or Sky Valley Sriracha Sauce, retailing for $9.69 at Walmart, could benefit from Sriracha’s shortcomings. Another option is Weak Knees Gochujang Sriracha Hot Sauce, which receives almost 5 stars on Amazon and boasts a compelling name for hot sauce enthusiasts.
Back in March, grocers were experiencing higher margins and increased shopper loyalty through private-label offerings. PYMNTS Research conducted during that time revealed that while many shoppers had already switched to purchasing more affordable brands, many consumers remained loyal to their preferred products regardless of available deals. However, most consumers were open to switching if presented with an enticing offer.
So, what has changed since March? During an earnings call with analysts on June 29, McCormick & Company’s President and Chief Operating Officer, Brendan Foley, highlighted the growing consumer inclination to embrace established brand names. He discussed the company’s financial performance for the second quarter of 2023 and noted that consumers still prefer brands, even when facing economic pressure.
In supporting this statement, PYMNTS data reveals that consumers are reluctant to compromise on their preferred products, even during significant grocery price increases. A study titled “Consumer Inflation Sentiment: Consumers Buckle Down on Belt-Tightening” surveyed over 2,600 consumers in September and revealed that only 37% of grocery shoppers resorted to purchasing lower-quality items to cut costs during the inflationary period.
Foley acknowledged that there had been some trade-down behavior, although not to the same extent as before.
“We’re not currently witnessing as much trade-down behavior as we did during the peak of this inflationary period. However, we typically see trade-down happen during inflationary or recessionary times, and private label products certainly appear to gain market share,” Foley said.
In conclusion, while the private label trend has gained significant traction, it may have reached a plateau regarding market saturation. While dedicated enthusiasts are willing to pay a premium for their favorite products, most consumers find such prices too steep. Now this presents an opportunity for other brands to capitalize on the shortcomings of private-label offerings. Established brands like Texas Pete, Sky Valley, and Weak Knees have the potential to attract consumers who are looking for alternative options. Recent data indicates that consumers still prefer trusted brand names, even amid economic pressures and inflation. While there has been some trade-down behavior, it is less significant than during previous inflationary periods, and private-label products may be gaining less market share than expected.
