Traditional supermarket sales of private label products remained mostly flat in 2016, with dollar volume sales climbing just .1 percent, according to Nielsen data. That translated to a loss in market share for the year, with private label accounting for 18.4 percent of dollar share and 22.3 percent of unit share.
Numbers can be misleading, though, according to the New York-based Private Label Manufacturers Association. Private label’s slice of the retail pie last year totaled $118 billion, but that figure doesn’t include some of the top users of store brands, according to an analysis by the association. If figures from Costco, Aldi, Trader Joe’s and other retailers not included in the Nielsen data were added in, private label sales would likely be closer to $150 billion, according to PLMA.
“Steady and widespread” is how PLMA characterizes the growth of private label in grocery outlets in the past decade, with tens of billions of dollars of incremental sales changing the retail landscape across all channels.
|Brian Sharoff, PLMA|
The advantages of private label for instore deli and grocery are many, says Brian Sharoff, PLMA’s president.
“The main advantage is private label in these categories helps build consumer loyalty to the retailer as well as contributes to the image of store brands throughout the store,” he says.
Private label in bakery and deli prepared, however, does face challenges that private label in center-store doesn’t, Sharoff says. In bakery and deli prepared, for example, it can be hard to find existing industry benchmarks against which to compare the quality of a private label product.
“The challenge is to make sure that the quality and assortment of private label matches consumer expectations,” he says. “It’s a little easier to match good private label to well-known national brands on ingredients, taste and packaging. In deli, prepared and bakery, there may not be comparable national brands, so the quality and assortment have to stand the test on their own. That’s why quality of private label is so important."
According to data from market research specialist IRI cited by PLMA, shoppers could save $44 billion a year switching from national brands to private label products.
And even with supermarket growth flat, in 2016, more than one of every five items sold in U.S. supermarkets was a private-label product, according to PLMA. In total, about $150 billion worth of store brands were sold last year, and almost half of U.S. trips for groceries results in a store brand purchase “always or frequently,” according to PLMA data conducted by Surveylab.
In addition, store brands fared better in channels other than traditional retail in 2016, according to Nielsen. In the mass merchandisers/club/dollar store segment, sales climbed 4.4 percent to $49.6 billion, representing a 16.6 percent dollar share of the market. Unit share jumped 4.2 percent, compared to just .2 percent for national brand share. Unit share’s percentage of the total market, meanwhile, increased to 19.7 percent.
The leader of one of the nation’s top grocery retailers and wholesalers is bullish on the future of private label in deli and other departments. In a Sept. 7 presentation at the Goldman Sachs Annual Global Retailing Conference in New York, Mark Gross, Eden Prairie, Minnesota-based Supervalu Inc.’s CEO and president, said private label addresses two of consumers’ biggest concerns when they shop for groceries: cost and quality.
“The big thing is affordability, and one of the drivers of affordability (and) people wanting quality is the growth of private brands,” he said. “And that’s why we spent so much time on having a well-developed private brand program.”
The goal in private label, Gross said, is to offer an item the consumer can “clearly identify” as being the equivalent of a well-known national brand, but more affordable. The channels in which Supervalu has had the best success with private label are natural foods, organic and gourmet, where the brand name competition often isn’t as intense as it is in traditional grocery.
“We see substantial growth there,” he said. “In part, I think what you’re seeing is a very clear value equation. The products easily communicate that these are high-quality items but at a very fair price point.”
Culinary Circle, one of the two Supervalu private label brands for natural/organic/gourmet, includes a full range of deli items, including specialty cheese and meats, dips, salads, sandwiches, soups and pastas.
For Supervalu, the test of a private label item’s success is clear, Gross says. “Customers being able to look at your private brand and say, ‘This stands for quality and I want to buy this product wherever I find it.’ I don’t think we’re the only ones having that sort of success in private brands, but as far as distributors, I think we have the most well-developed private brand offering and really spend a lot of time and resources on it.”
Fletcher, North Carolina-based retail chain Earth Fare currently offers about 750 private label products, and spokeswoman Laurie Aker said the company will add hundreds more in the near future. Private label gives Earth Fare’s customers the peace of mind that what they’re buying meets the natural and organic chain’s clean standards: free of high fructose corn syrup; free of artificial fats, trans-fats, colors, preservatives and sweeteners; non-GMO; and other criteria
“Private label is a growing category that offers compelling value and that our customers can feel confident buying,” Aker says.