At Encino, California-based retailer Gelson’s, the balance of private label and branded products in the chain’s fresh perimeters often depends largely on the individual departments.

In deli and dairy, for instance, Gelson’s focus continues to be on branded because of customers’ strong brand loyalty for products in those categories, says Rich Gillmore, senior director of center story category management.

“That’s especially true in first-to-market and local,” Gillmore says.

That said, Gelson’s is open to tipping the scales a bit more toward the other end of the scale — as long, Gillmore says, as it’s done carefully, so as not to offend those brand loyalists.

“We’d love to create new private label items where the opportunity exists,” he says. “Some of our most successful private label items exist in the deli/dairy departments. But we have to be cautious what categories we decide to play in with private label.”

In Gelson’s produce departments, however, private label is definitely more popular, and will likely become even more so, says Paul Kneeland, the chain’s vice president of fresh.

For meat and seafood, it’s a good mix, says Sean Saenz, Gelson’s senior director of meat and seafood operations.

“Private label is a continued focus as it will allow you to compete with the top national brands with a higher profit margin,” he says. “For Gelson’s meat operation, the ability to procure only the finest quality items, making sure they are better than the national brand, is a win-win. Having first-to-market , exclusive or locally made national brands is always a win.”

A trend toward private

In the past couple of years, the trend in instore bakeries has shifted toward private label, says Josh Bickford, executive vice president of strategic initiatives for Addison, Illinois-based Clyde’s Donuts.

“Private label bakery items allow the instore bakery to create its own identity, and many retailers are using private label products to turn their bakery into a destination,” he says. “Private label product creates an identity for the retailer, and a cohesive story of what customers can expect. We find that when combined with high-quality instore bakery products, retailers are proud to put their name on it.”

 Private label sales have also increased by $7.9 billion across brick-and-mortar stores in the past three years

Source:  Nielsen

Regardless of how individual Gelson’s perimeter departments are stocked currently, in the future, the company definitely wants to increase its private label offerings across the board, Gillmore says.

“We are focused on increasing private label exposure wall to wall,” he says. “It is more important now than ever before. We want customers to know that they can find unique items at Gelson’s that are unique and different than what they find at the competition.”

Positioning those items under its own labels, he says, allows Gelson’s to “control that differentiation.” Top private label items include fresh salsa, hummus, ravioli and eggs, Gillmore says.

Gelson’s also has had good private label partnerships with specialty cheese companies who make Gelson’s exclusive product just for the retailer, often teaming up with local breweries or wine makers for pairings, Gillmore adds.

“We are growing private label in the fresh departments for certain,” adds Kneeland. “We can be more selective in our specifications, uniqueness of ingredients in private label.”

Packaged salads, juices, soups and sandwiches are among the top private label sellers in Gelson’s perimeter departments, Kneeland says.

“For our strategy, branded items would be more everyday NBEs, whereas items that excel and are elevated are considered more for private label.”

Saenz agrees that private label continues to grow.

The private label market for bread was pummeled between mid-2018 and mid-2019, with dollar sales down 7% and unit sales down 11%.

“The focus is always going to be to try and leverage the top trending national brands or categories with private label items that will increase profits and grow sales,” Saenz says. “Top quality private label products create loyalty to your brand and keep your customers.”

Some of the top private label items in the meat department are fresh all natural and organic chicken, premium sliced bacon, fresh all-natural and organic ground turkey, spiral sliced half hams and full cut ham steaks, fresh dinner sausage and fresh whole all-natural and organic turkeys.

“For the meat department, your top volume categories such as poultry, smoked meat, and fresh and cooked dinner sausage will always be the best categories to leverage private label items — if you can deliver the quality and consistency,” Saenz says. “At Gelson’s, our meat and seafood departments’ goal is to deliver great personal service, offer only the finest quality products with the highest craftsmanship and deliver a great eating experience a consistent basis.”

The case for branded

Private label in the deli and prepared foods section is less mature than in center-store, says Nathan Roe, senior manager of deli strategy and customer marketing for Beaverton, Oregon-based Reser’s Fine Foods.

As the nation’s leader in fresh prepared foods for the deli department, Reser’s works with retail grocery buyers to guide them on best practices in private label and branded product strategy, Roe says.

“Perishable private label products are unique because of the shorter shelf life,” he says. “For best category results, reaching the broadest range of consumers, we recommend blending private label and branded products. Consumers demand a variety of choices.”

In Reser’s experience, having a two-brand strategy for deli salads is key to sales versus the no choice/only private label used by some retailers.   Some of the company’s most popular items are its variety of potato and pasta salads that vary in recipe by region, Roe says. And in recent years, Reser’s has seen a growing opportunity among consumers who are looking for clean ingredients and bolder, authentic and adventurous flavors.

“The key is to maximize product success with smart SKU assortment decisions,” Roe says. “Another thing to keep in mind is how to plan private label lines in the deli department when similar categories are sometimes available in meat, produce and dairy.”

All successful grocery retail stores find the right balance of private label and branded, and Gelson’s is no exception.

In contrast with private label, branded products come with strong promotional plans and are familiar to customers, Gillmore says.

“Once our customers find a brand they like, they tend to stick with it regardless of price or competition,” he says.

In addition, Gelson’s small store count can make packaged private brand programs more difficult, since packaging minimums are often restrictive.

“We can only play in the higher volume categories,” he says.

“Top performing branded product offerings will draw your customers to your market,” Saenz says.

Top branded items in Gelson’s meat departments include the Certified Angus Beef brand of USDA Prime and Choice beef.

“Less than 3% of beef achieves the high standards of Certified Angus Beef brand Prime,” Saenz says. “Marbling is key to its amazing flavor, juiciness, and tenderness.”

Certified Angus Beef brand Prime Filet Mignon Steak is the No. 1 selling item in Gelson’s meat category.

“Walmart will continue to prioritize private label as they pursue Millennial and Gen Z shoppers. Walmart is looking at more categories to grow options.”

- 8^th and Walton

Branded products do well where there’s a large, national recognition or established social following, Bickford says. Branded products are also the right fit for a retailer who doesn’t have a stable private label brand or who wants to highlight unique products with a loyal following.

Social media and marketing adds significant value to a branded product, where unique ingredients or claims (“peanut-free”, e.g.) offer a product customers can repeatedly trust.

“While Clyde’s branded products remain strong and growing, we have seen an increase in private label requests,” Bickford says. “As the grocery and instore bakery space continues to be more competitive, retailers are looking for ways to continue to differentiate or create their own brand identity.”

Clyde’s offers a total donut solution, which takes a balanced approach to branded and private label products depending on each store’s goals. Clyde’s top private label products are traditional donut staples, like glazed rings and a variety of donut holes, because bakeries can usually focus a targeted price point, Bickford says.

Many of the unique or specialty items, like Clyde’s Donuts Glazed Apple Fritters or Clyde’s Donuts French Toast Fritters, are better suited as branded items for repeat purchases or promotional LTO periods.

Private label brands that offer trusted, consistent quality and common packaging formats enable the instore bakery to differentiate and increase retail brand loyalty. In 2018, Clyde’s was the no. 6 top grocery donut brand, behind commercial bakeries like Hostess and Krispy Kreme.