Private label is more influential than ever in determining store choice, report says

Dive Brief:

The Food Marketing Institute (FMI) and IRI have released the final piece of a three-part analysis, which found that 46% of customers say private label brands influence where they shop, up from 35% three years ago. Private brands are also reaching a larger audience across demographics and generations.
Private brands in the U.S. generated $153 billion in 2018, including edible and non-edible products across multiple retail outlets, according to the report.
The analysis also found that store brands led national brands in dollar sales growth for the second consecutive year, up 5.4%, though grocery retail growth in private brands hasn't kept pace with other retail channels.

Dive Insight:

More frequent shopper trips, increased sales velocity and more items in the cart have contributed to continued strength in sales of private label, according to the research.

The success comes from grocers using their private label lines to innovate and not just copy national brands like they did in the past, according to FMI’s vice president Doug Baker. "The proof is in consumer satisfaction; shoppers surveyed shared most that they trust the quality of private brands and believe they get a good value. Still, our research indicates that challenges remain for private brands’ image, such as its packaging," he said.

As formulations have improved, packaging hasn't always kept pace. But in recent months, grocers have been rebranding their private label offerings and creating a sleeker presentation. Earlier this year, Raley’s gave its private-label lines a facelift with fresh packaging that is more transparent. SpartanNash also cleaned up product ingredients and refreshed the packaging for its Our Family and Open Acres private brands.

Private label brands have allowed grocers to gain customer loyalty amid fierce competition. For example, market intelligence firm Numerator recently found that shoppers who purchase popular private label items at Costco (rotisserie chicken) and Trader Joe's (cauliflower gnocchi) shop more frequently and spend more overall than other customers.

In addition to Costco and Trader Joe's, grocers that have invested heavily in their private label brands include Publix, Target and Kroger. Just this week, ShopRite jumped on board and introduced two new premium private label brands that will absorb a few of its existing brands.