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Despite Recent Popularity, Store Brands Have Yet to Reach Full Potential

IRI report on private label sheds light on growth areas and opportunities
Lynn Petrak, Progressive Grocer
The Fresh Grocer Rolls Out New Private Label Products
Private label portfolios like this assortment have opportunities to reach even more shoppers, according to a new IRI report.

The spike in inflation and sales of private label products aren’t necessarily on the same trajectory. That’s one conclusion from Chicago-based data analytics and market research firm IRI.

According to IRI’s new report, “Private Label Brands: Look Who’s Buying Now,” nearly all U.S. households (99.7%) purchase store brand products and private label items have increased their share of all-outlet sales by 17.5%. In addition, 35% of consumers say they “frequently” or “always" choose a retailer based on their selection of store brands, up 2% from last year.

[Read more: "4 Notable Innovations in Private Label"]

That said, there is potential for even greater growth in today’s merchandising environment. "While consumers have historically navigated to store brand products to save money during challenging economic times, we’re seeing that only modest gains have been made in private brand’s share of the consumer wallet this year," pointed out Mary Ellen Lynch, principal, center store solutions for IRI. "Retailers must be hyper-focused on understanding their shoppers' needs and emerging opportunities to spur growth amid modest private brand trends throughout the entire retail landscape."

Many of those gains are coming in the food and beverage space. IRI found that such consumables are increasing their dollar share, as the dollar share of nonfood products is flat. When consumers are buying store brand nonfood items, they tend to favor club and mass stores. Both of those channels are increasing their share of consumer spending on nonedible products.

Private label items are buoyed by certain buying groups. According to IRI’s report, loyalists in this sector are typically older, from larger households and less urban. More than half (54%) have a median household income of less than $70,000, while SNAP recipients remain an important segment of the market. IRI revealed 36% of SNAP shoppers will switch to store brands more often.

In its report, IRI outlined areas for growth for retailers as they position their store brands for success. Among other suggestions, analysts said that retailers can appeal to younger shoppers by providing more products centered on convenience, health and wellness and flavor adventure.

The report also underscored the importance of promoting store brands in a similar way as branded products. Retailers can benefit from focusing on store brand R&D, packaging, promotions, placement and pricing and also regularly encourage trial of products across their store brand portfolio, the research firm noted.

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