Consumers Flock to Private Label Brands

Consumers Flock to Private Label Brands

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Consumers Flock to Private Label Brands

Originally Posted On: Consumers Flock to Private Label Brands (tracegains.com)

 

Consumer behavior changed dramatically in 2020, sending shockwaves through the retail market.

As state and local government imposed stay-at-home orders across most of the United States at some point in the year, consumers started grocery shopping online – in droves. Nearly two-thirds of U.S. shoppers reported buying online, according to research from Oracle Retail. More than half of those consumers rarely had, if ever, shopped online for groceries before the pandemic. And 92% of them planned to keep shopping online in the future.

Consumers also started buying more, stockpiling goods in preparation for prolonged lockdowns. As a result, retailers struggled to keep store shelves stocked. Rather than wait for restocks, shoppers – usually driven by habit – turned to alternatives, with 86% of them trying private label brands, based on Oracle’s numbers. Nearly a third of those interviewed said they “intend to stick with the store brands.”

“The surge in private label purchases has become the unexpected silver lining of COVID-19 for grocers,” Oracle Retail SVP and General Manager Mike Webster said. “Consumers uninterested in trying something new were forced to branch out due to shortages and now plan to stick with their new finds. This allows grocers an opportunity to increase brand affinity with customers and, in turn, their margins.”

Private Label Surge Predates Pandemic

Consumers had started turning to private label brand sales even before the pandemic – and shortages – forced their hand. Private label brands have shrugged off their lingering reputation as inferior knockoffs of their name brand cousins, particularly among younger consumers.

Private labels saw sales growth of 4.1% in 2019, three times that of name brands, according to the Private Label Manufacturers Association (PLMA). This growth has led to record-breaking market penetration, 19.2% in dollar share, and 23.1% in unit share.

In a 2019 study, PLMA discovered that two-thirds of those surveyed agreed that “In general, store brand products I have bought are just as good if not better than the national brand version of the same product.”

Private Label Drinks Go Premium

Private label brands have not only shed their value image; some have even graduated to premium status.

“Consumers expect even value-oriented store brands to be at least on equal caliber in quality and taste with national brands,” according to market research firm Mintel’s latest report. “And three-quarters of private label consumers believe store brands reflect on the quality of the retailer itself, indicating that retailers are only as strong as their private label offerings.”

In short, private label offerings have become a market differentiator for retailers, which have turned to premium and wellness private label beverages such as cold-brewed coffees and cold-pressed juices.

It makes sense. Private label brands dominate the single-cup coffee segment, for example, is credited with “more than $1 billion in sales, a 7.3% increase, for the 52 weeks ending Oct. 4 in total U.S. multi-outlets and convenience stores,” according to market research giant IRI.

The demand is such that consumers are looking beyond grocery stores for private label products.

“Reflecting overall shifts in food and drink shopping patterns, sales of private label food and drinks have seen their greatest growth outside of traditional supermarkets,” Mintel’s research found. “Mass merchandisers, club stores and dollar stores, in particular, are dedicating focus on private label product development. With more than half of consumers saying store brands influence where they shop for food/drink, these other retailers are well-positioned to be a long-term threat to traditional grocery stores.”

Private label brand owners that can respond quickly to this seismic shift in the market will be better positioned to thrive moving forward. But it’s often easier said than done. Companies need to adopt a nimble new product development process and foster better relationships with supply chain partners.

Join Mel Bandler, Brand Retail Sustainability Manager at Fair Trade USA, and TraceGains for a live webinar, “What’s in Store for Private Labels in 2021,” to discuss what trends grocery label brands can expect in the coming year and how to overcome challenges to outpace the competition.

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