Three shoppers walk into a grocery store. All of them are looking for value, one of them wants to go organic, and one just wants to mix things up.
What do you get when you combine shaky consumer confidence, tight competition, and product and packaging innovations?
It’s not a punch line, although it’s a trend packing some punch: the continued growth of private label and store brands, and the increasing number of retailers investing in such programs for a variety of products.
The numbers largely look good for private label/store brands. Boston-based Trace One, a provider of product lifecycle management solutions and transparency software for retailers and suppliers, reports that a whopping 95 percent of consumers buy private brands.
Although store brands and private label SKUs have long been purchased for price reasons — and touted as such — a broader definition of value has emerged in recent years. The Private Label Sourcing Survey 2015–16 from New York-based Deloitte found that retailers’ main objective for private label brands is to create a lower-priced, quality-consistent alternative, followed closely by their desire to establish exclusivity.
Recent market research supports the notion that there’s work to be done on some private label and store-brand identities to reach that second objective of establishing exclusivity. Trace One reported that while 75 percent of shoppers say they buy private label for the lower price point, only 22 percent say they purchase such products because they trust the quality.
Many retailers are working to improve that number and bolster the quality perception by introducing new private label products, revamping existing private label offerings, and even creating different private label and store-brand product lines. For example, more than half (56.9 percent) of retailers surveyed in the 2015 State of the Industry Research Study in Store Brands (PG’s sister magazine) said that their companies offer a multitiered private label program.
To set their private label products and lines apart, retailers are paying attention to changing consumer tastes, especially when it comes to premium, natural/organic, gluten-free and other specialty items.
The surge in interest in natural/organic/better-for-you products — especially among the much-talked-about Millennial demographic — is a major opportunity for private label and store-brand products, notes Amanda Topper, food analyst for Mintel. “Along with a move toward healthier eating and better-for-you foods, many private label food products are focusing on clean labels, with easy-to-read ingredients and product claims,” she observes.
Recently, more retailers have addressed that demand for natural products and clean labels. Grand Rapids, Mich.-based Meijer Inc., Progressive Grocer’s 2015 Retailer of the Year, has rolled out a line called True Goodness, which is essentially a fusion of its previous Naturals and Organics private-brand lines. “This brand makes real food more approachable, and is part of our ongoing focus to provide health-and-wellness options for our customers,” remarks Peter Whitsett, Meijer’s EVP of merchandising and marketing. As part of the True Goodness reboot, 100 new products will be added this year, spanning a variety of USDA-certified organic and/or free-from products.
Last year, Aldi, whose U.S. headquarters is in Batavia, Ill., began to remove certified synthetic colors, partially hydrogenated oils (PHOs) and added MSG from its store-brand line of products, which comprise roughly 90 percent of store sales. The limited-assortment retailer has also recently introduced its liveGfree and SimplyNature lines.
Beyond food, other grocery categories can be viable areas for natural private label and store-brand offerings. Wegmans Food Markets, based in Rochester, N.Y., recently rolled out a line of USDA-certified store-brand organic skin care products under the Wegmans Organic Hand & Body Collection banner.
Mintel’s Topper says that conveying quality is key for natural, organic and free-from private label and store-brand items. “[E]mphasizing product quality and affordability will be important, especially if comparing to national brands with these product claims,” she points out.
Adding more premium and diverse products is another way to enhance a store brand and its reputation for quality. Notes Topper: “These products appeal to consumers looking for quality without having to sacrifice value.”
Here, too, there are several examples of retailers investing in private label and store-brand revamps. The Kroger Co., for instance, is introducing the HemisFares line of products imported from “the most food-rich regions of the world.” Explains Gil Phipps, VP of corporate brand for Cincinnati-based Kroger, “Our goal with HemisFares is to bring only the best food finds to our customers.”
When it comes to merchandising store brands, attractive, informational packaging and easy price comparisons can garner greater consumer attention and sales, advises Topper. “Shoppers are attracted to packaging featuring more product for the same price, as well as functional packaging, such as easy to open, resealable and easy to store. These attributes are especially important to high purchasers of store brands,” she says, adding, “[L]isting unit price comparisons between store-brand and national brands on store shelves may influence shoppers who do not typically buy store brands to consider making a purchase.”
“Along with a move toward healthier eating and better-for-you foods, many private label food products are focusing on clean labels, with easy-to-read ingredients and product claims.”
—Amanda Topper, Mintel
“Our goal with HemisFares is to bring only the best food finds to our customers.”
—Gil Phipps, The Kroger Co.