Almost a decade ago, Brandweek (which ceased print publication in 2011) proclaimed 2009 as the Year of Private Label. In the intervening years since, sales of store brands have indeed challenged heritage brands’ dominant position, and industry analysts forecast continued growth for the private label food and beverage market well into 2021.
Various food and beverage industry trade publications took note of the reporting that while private brand sales across all channels reached $138 billion last year, the grocery channel saw private brand sales dip slightly as club stores, mass merchandisers and online retailers increased their private brand sales.
At one time, the grocery channel not only pioneered the private brand concept, it owned the space.
Traditional grocery store brands have struggled in recent years to find their niche within the expansion of other store banners in other channels (club, discount, online and natural/specialty) and, in particular, Trader Joe’s and Costco’s Kirkland Signature have helped convince consumers that it now makes perfect sense to buy a “premium-quality” food or beverage experience from a store-label brand, not just confine private label symbolically to lower-priced “value” offerings that the sector pioneered decades ago.
Our research into food-shopping behavior finds that having a good assortment of private label products is high on shoppers’ list of attributes that sets one retailer/channel apart from others. We also find that consumers’ reported changes in shopping habits echo sales data that shows stronger growth among more specialized players like Aldi.
The fastest-growing retailers in terms of sales are either more upscale natural/organic players or value-oriented retailers who have created innovative business practices to keep prices as low as possible. Less specialized retailers, including most conventional grocers and mass merchandisers, show slower growth. Cross-shopping that leverages channel strengths — from low prices to organics to store brands — is likely stealing from these retailers’ share of the pie.
Organic Store Brands at Retail: Who Do You Trust?
Private label is increasingly what consumers are looking for. With many store brand organic and natural offerings available today, private label also overlaps with healthy products.
Shoppers appreciate the efforts retailers are making today to bring them healthier, less processed and thoughtfully chosen products. They welcome the organic and natural private brands emerging at grocery and specialty retailers, and many are happy to consider these more affordable options. According to our Organic & Natural 2018 report, only 15 percent of shoppers claim to never buy organic products. More than a third of consumers (38 percent) say they are buying more organic products compared to one year ago.
One of the biggest shifts in the organic landscape in recent years has been the dramatic increase in product selection and visibility of private brands. Private brands are now available to consumers across retail channels. This availability has led to new perceived shopping behaviors among consumers.
Compared to a year ago, 33 percent of shoppers say they are purchasing more private brands with a line of organic products.
Who do shoppers trust most to offer quality organic food and beverage products? As the following chart depicts, trust is an area where traditional grocery stores lag behind specialty/natural retailers and manufacturers who specialize in organic brands.
We also see a decline in the perception of price as a barrier to purchasing organic food overall, likely due to growth in private brand organic and natural options.
Our Hartman Retainer Services Team’s Breakdown
Consumer interest in private brands will continue, but manufacturers can hone their strategy by watching more differentiated retail channels and banners. Hartman’s research on consumer attitudes toward private brands reveals that they are eager to consider them from a trusted retailer, especially when it makes premium attributes like organic more accessible to them. Limited-assortment stores like Aldi, club stores and online retailers have more differentiated offerings compared with traditional grocery, and their private brands’ growth reflects this. In contrast, grocery stores’ private label assortment reflects an effort to serve a wider range of needs and occasions, with many categories and tiers of private brands that can muddy consumer perceptions. If alternative channels continue to grow their private label businesses, manufacturers could lose sales from private label partnerships in grocery or even national brand sales as these channels steal more trips from the supermarket.
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As leaders in the study of American food culture, The Hartman Group has been tracking how Americans shop for food since the 1990s. From one-stop shopping to multichannel shopping to online markets and click-and-collect, we continue to track consumers’ evolving perceptions, needs, habits and relationships with food retailers. New to the 2017 report is a special section on the expansion of the discount grocery channel, the emerging fresh-format channel and smaller-footprint retail formats.