Is private label grocery about to go to the next level?
Through a special arrangement, presented here for discussion is a summary of a current article from Frozen & Refrigerated Buyer magazine.
What a difference 12 months makes! Last year at this time, we were resigning ourselves to the fact that private label shares in food may have plateaued — and store brands in the U.S. might never enjoy the kind of success they have in Europe.
Now, a new report from Cadent Consulting suggests private label dollar share could swell as much as eight points to 25.7 percent by 2027.
Ranking number one among the “sea changers” driving the growth was — no surprise — the Amazon.com/Whole Foods combination. Put Whole Foods’ 365 brand in the hands of one of the country’s top three retailers and “there’s a significant opportunity for private label acceleration,” said Cadent managing partner Don Stuart.
Online’s influence is also expected to be felt with the arrival of niche sites such as Brandless.com, an online startup that sells a wide variety of own brand essentials for $3 a pop, as well as Walmart-owned Jet.com’s aggressive efforts in private label.
The expansion of Aldi and Lidl coupled with other chains’ responses to the pair is also seen as a private label growth driver.
There’s also something Mr. Stuart calls “perimeter power.” In the past four years, perimeter sales have grown at four times the rate of center store sales and many perimeter categories are dominated by store brands.
And what group shops the perimeter more than any other? “Brand agnostic” Millennials, a generation less interested in name brands than product attributes (clean labels, transparency, shared values, etc.). Stores can take advantage of missed opportunities around all natural, organic and gourmet where better-for-you attributes and transparency can outweigh brand cachet.
The margin opportunity in heathier products is still expected to be an overriding reason many stores push private label growth. But more retailers are seeing private label as the X factor that differentiates their store from dozens of others that stock the same national brands at the same prices. Said Bob Shaw, president, Concentric Marketing, “They’re stepping off the me-too diving board and asking, ‘How can I build loyalty with unique, my-store-only items?’”
DISCUSSION QUESTIONS: Do you expect private label expansion in food categories to continue in the years ahead? If so, what do you see driving the share gains? How can food retailers best take advantage of the trend?