Going Private: How to Succeed in Store-Brand Sector
Defining the Frequent Private-Brand Shopper
FMI’s “The Power of Private Brands 2022” report finds some key characteristics of shoppers who say that they frequently purchase private brands:
• They skew female (58%).
• They’re more likely to be Millennials (37%) than Baby Boomers (22%).
• They’re likely to be in households with kids (40%) and have a slightly larger household size.
• They’re more likely to come from households with income of less than $50,000 (48%).
• They’re more likely to come from rural areas or small towns (41%) or urban areas (31%), compared with suburban areas (28%).
• They tend to spend more weekly on groceries ($168 versus $152).
• They’re most likely to claim a mass merchandiser as their primary store (37%), as opposed to a grocery store (30%).
Consumer Price Index (CPI) information released in July by the U.S. Bureau of Labor Statistics showed that the 1.3% inflation rate in June topped the previous month’s figure that was a 40-year high. The CPI for all items was up 9.1% for the past 12 months, while the CPI for food at home was 12.2% higher than last year.
As of late July, gas prices were finally starting to come down, and prices of some food items like cooking oil, coffee and avocados were beginning to drop, although they remained relatively high.
IRI’s Lynch notes that if gas prices start to return to a more normal range and consumers hold off on larger purchases because of high finance rates, we could see shoppers shift some household dollars to discretionary CPG goods or preferred brands that they previously put on hold.
More Than a Low Price
Beyond low prices, today’s private brands are also seen as providing good value — which is certainly a plus compared with years ago, when they were referred to as “generic brands.”
“Nearly 70% of consumers say private brands are a better value for their money,” observes Daymon’s Moberly. “Consumer expectation is at an all-time high, with shoppers looking for products that not only fit their budgets, but deliver on lifestyle needs ranging from health and wellness, to meeting sustainability desires, to minimizing environmental harm, to cultivating convenience.”
FMI’s report confirms this, noting that shoppers say the taste and quality of private brands they use are on par with national brands. Shoppers actually list taste as the No.1 factor in their product selection, whether they’re purchasing a private brand or a name brand.
“Retailers have worked hard in recent years to develop store brands as good as or even better than the national brands, so it comes down to getting shoppers to try them,” notes Lynch. “Driving consumer trial of store brands is key to success. And I think it’s even more important in the current inflationary climate, because shoppers won’t want to risk spending any of their budget on something that they or their family won’t like.”
Here are just a few examples of retailers getting more creative with private label, as published on Progressivegrocer.com in recent months:
Neckarsulm, Germany-based discount retailer Lidl, which now operates about 170 stores in nine East Coast states, is running a price-cutting campaign over the summer that features more than 100 items ranging from frozen prepared foods to household products. The largest savings will be on items such as Black Angus top sirloin steak, dried cherries, orange juice, ground coffee, bratwurst, hot Italian sausage, apple juice and pound cake. The retailer didn’t specify how many of its own brands would be included in the campaign.
Ahold Delhaize USA’s Peapod Digital Labs has launched an Incubator Program for certified diverse-owned suppliers to develop “new, exceptional-quality private-brand products.” During the two-and-a-half-month program, the chosen participants will learn from the company’s private-brands team about its private-brand structure and goals, and will grow their knowledge of its existing brands. Participants will be paired with private-brand mentors, who will help them prepare for their final product pitch.
Regional chain Raley’s, based in West Sacramento, Calif., has implemented CMX1 for Grocery, a private label management solution from CMX that enables sourcing, supply chain transparency and supplier compliance. “CMX1 for Grocery has taken what was once a largely manual process across multiple systems at Raley’s and enabled us to have a single solution with standardization and automation for how we manage our private label program,” said Elodie Thao, Raley’s senior food safety and quality assurance manager, who noted that the chain is gearing up to expand its offerings.