FMI Sizes Up Pandemic's Impact on Private Brands
COVID-19’s impact on retailers and the supply chain is front and center in FMI — The Food Industry Association’s “2020 Power of Private Brands” report. For instance, the report found that 83% of food retailers expect to boost private-brand strategies for online purchasing, and that 97% of retailers are rethinking private-brand assortments and supplier strategies due to the coronavirus pandemic.
Additionally, 77% of private-brand retailers expect to focus more on low-price, value-oriented store-brand items, and 73% are focused on items that support home cooking and meal preparation. All of those behaviors, from buying online to cooking at home, are clear indicators of COVID’s impact on households.
This is a slightly different feeling compared with last year’s “Power of Private Brands” report, which discussed the strong growth of private brands going into 2020, reporting that from 2017 to 2019, private brands were leading manufacturer brands in sales growth across multiple outlets, including young consumers, with 54% of Millennials saying that store brands were “very or extremely influential on store choice,” up 35% from 2016.
That's not to say that the pandemic has wiped away all of the momentum in 2020, but retailers are focused more on strategies to serve shoppers in a pandemic.
And by the numbers, there's still some momentum behind private brands. In accordance with IRI, the latest "Power of Private Brands" report observed that private-brand sales outperformed national brand sales early on in the pandemic (up more than 15%), but after May 31, national brands outperformed store brands by a little more than 2%. Chicago-based IRI projects $15 billion to $20 billion in private-brand sales growth overall in 2020, a .6% gain in share.
Additionally, the latest report found that 33% of American consumers surveyed said they'll purchase “more private brands than before the pandemic,” and 13% said they'll purchase “much more.” Executives at food retailers feel the same, with 93% of them saying that they believe store brands to be “extremely or very important.”
“We’re encouraged that our consumer research suggests one-third of Americans expect to purchase more private brands going forward. We’ll need to maintain momentum for more meals shared at home with private brands, which is supported by the c-suite suggesting major investments in private brands in the future,” Doug Baker, VP of industry relations at Arlington, Virginia-based FMI – The Food Industry Association, told Progressive Grocer sister publication Store Brands.
“Both economic and supply-chain challenges have influenced the power of private brands during the pandemic,” Baker said. “Regarding the economy, we often witness upswings in private-brand purchases during recessions, and the current state of the economy would suggest consumers are seeking out ways to expand their food dollar. In addition, COVID-19 has affected grocery prices more than nearly any other category of consumer spending, so food prices also play a significant factor for budget-conscious shoppers, supporting store brand selection. As a bright spot for brand owners during the pandemic, out-of-stocks did encourage consumers to try brands that they might not have in the past, including private brands.”
As for private-brand opportunities going forward, the report found more than 83% of food retailer executives believe fresh foods, such as bakery and deli, represent a major opportunity for private brands.
Retailers will continue to emphasize e-commerce, too. The report noted that 76% of retailers find home delivery, click-and-collect services and e-commerce a “major growth opportunity.” Lastly, to help grow private brands, nearly 70% of the retailers surveyed said that they may “increase the number of suppliers” to diversify supply.