DISCUSSION
Are outsized private label gains in grocery a foregone conclusion?
Written by Tom Ryan
Grocery store brands are expected to be big winners in the near term as inflationary pressures and a potential economic downturn force consumers to trade down. Unlike other challenging periods, however, store brands have more going for them than low prices.
FMI’s “Power of Private Brands 2022” study found that 42 percent of shoppers who are buying more private brands buy them because they like the taste and 43 percent because of their quality. Store brands also increasingly rate higher on sustainability and contributions to health and wellbeing.
Price, nonetheless, remains the leading reason for purchasing private labels. FMI’s survey found that 63 percent of private brands shoppers consider private brands to be a good value and 55 percent buy private brands because they are less expensive.
Kroger, Walmart and Target on recent quarterly calls have indicated that grocery shoppers are trading down to store brands. Kroger’s Rodney McMullen told analysts, “When the economy is tight, our brands always gain share.”
National brands, which are estimated to account for about 82 percent of grocery's mix, have continued to make adjustments as store brands have rapidly expanded in the past few decades.
Indeed, national brands in 2021 grew faster than store brands for the first time since 2016 amid supply chain disruptions, according to PLMA’s “2022 Private Label Report.” IRI, which produced the report, found store brands facing more supply shortages in 2021 while stimulus dollars and reallocation of household budgets “spurred consumers to elevate in-home consumption with more premium purchases and new flavor experimentation” to the benefit of national brands.
Younger generations were also comparatively purchasing more national brands. Speaking to Convenience Store News, Mary Ellen Lynch, principal of IRI center of store solutions group, attributed the weakness with younger generations in part to the growth of e-commerce that tends to favor familiar brands.
National brands are expected to lean on innovation, familiarity and promotions, if necessary, to defend share. Sean Connolly, president and CEO, Conagra Brands, said on a recent quarterly call, “We believe the data shows that consumers are finding comfort in the quality, reliability and familiarity that national brands provide, particularly modernized brands like those in our portfolio.”
- Key Attributes Beyond Just Price Drive Shoppers to Private Brands – FMI-The Food Industry Association
- FMI study: Private brands not just about price – Supermarket News
- PLMA’s 2022 Private Label Report – PLMA
- Private Label Outpaces Name Brands for 4th Consecutive Year – Winsight Grocery Business
- Consumer Demand For Private Brands – IRI Worldwide
- Demand for Store Brands Declining Among Younger Demographics – Convenience Store News
- Inflation Accelerates Private Label Share and Penetration – Dataweave
- Why Are Private Label Products Not Thriving Amidst Inflation? – The Food Institute
- Conagra Brands (CAG) Q3 2022 Earnings Call Transcript – The Motley Fool
- Are store brands set for a big growth spurt – RetailWire
Discussion Thread0
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