By Jill Rivkin, Editor, Private Label Buyer magazine
Through special arrangement, we offer this excerpt from PLBuyer's recent cover article for discussion on RetailWire. Click to view the entire article, Price is Still Priority.
According to ACNielsen, 6 to 15 percent of U.S. consumers say they purchase natural and organic regularly, and those numbers are expected to grow. So where does private label fit in?
Recently, Pleasanton, Calif.-based Safeway made some noise introducing Safeway O, an organic private label lineup. Cincinnati's Kroger touts its Naturally Preferred line, Pittsburgh-based Giant Eagle plans to grow its Nature's Basket brand, and of course Austin, Texas-based Whole Foods Market continues to extend the reach of its 365 Organic line, while at the same time bringing new mainstream consumers into its stores. Retailers big and small are recognizing and reacting to the growing trend, but the real challenge is that many consumers don't know it yet!
According to original research conducted for PL Buyer by Stamford, Conn.-based InsightExpress, 42.3 percent of shoppers say they purchase organic products, with 78.3 percent of those purchases made at their traditional grocery store. But more than half - 53.1 percent - say they have never seen or heard of private label organic products. Only 26.6 percent say they have heard of them, and 20.1 percent were not sure. There is quite an opportunity here to organize and educate consumers on private label organics - many are buying organic already, but don't know that private label is an option. Only 16.9 percent say their grocery store "educates me on its private label organic program."
Retailers have their work cut out for them. Only a quarter of respondents say they are "very likely" or "extremely likely" to buy private label organic products if they were available where they shop, and 40.5 percent say they are "not very likely" or "not at all likely" to buy private label organics.
The study shows across the board that consumers continue to be price-sensitive in purchasing decisions, expecting private label to offer a strong value against the national brands and maintain expected quality levels at the same time. But the price-sensitivity is even more prevalent in the natural and organic category, as these products tend to carry higher price points that can make the category exclusive. Nearly 54 percent of respondents agree that "price prohibits me from purchasing more organic products." And 51.3 percent agree they would be "more likely to buy organic if it's private label, as I would expect it to be less expensive."
Consumers did have clear opinions on where they would like to see private label organic offerings. Only 31.2 percent said they would like to see organic items in a separate area of the store, while 43.6 say they would like to see organic items interspersed throughout the store. The store-within-a-store concept does not have legs with this consumer group.
Moderator's Comment: Do consumer price and quality perceptions of organics work to the advantage of private label, or will it make adoption of PL organics that much more difficult? - Rick Moss - Moderator