There were two very noticeable trends at the 34th annual Private Label Manufacturers Association's (PLMA) Annual Conference last week in Chicago — organics and gluten-free. At least 20 gluten-free vendors were exhibiting, double last year, presenting everything from pizza to pasta. The real growth, however, was in organics. Not only did dozens of new companies exhibit this year, suppliers that have been at the show for decades were promoting their new organic lines.
The reason for the focus was made very clear at one of the educational sessions, titled "Store Brand Organics: Where Value Meets Profit." The moderator, Bob Vosburgh of PLMA, stated that in 1998 the organic space was about $6 billion and 25 percent of that was through traditional supermarkets. A mere 16 years later, the market is well over $50 billion and more than 55 percent of sales are through traditional supermarkets.
Safeway has sales of more than $400 million in store brand organics and Kroger's organic private label program is a billion dollar segment for the U.S.'s largest supermarket chain. Walmart has more than 100 store brand products available in organics, all priced to be competitive with the national brands. Mr. Vosburgh listed private label organic product sales drivers as including the passion of consumers, who can total as many as a quarter of a retailer's shoppers. These customers acquire organics on at the regular basis and aren't as loyal to national brands as they might be for non-organic products.
It isn't all non-GMO cake for retailers implementing organic store brand programs. Companies are facing issues like unavailable supplies, high order minimums, certification problems and shelf placement.
Greg Oldright, director of specialty foods at Midwest grocery wholesaler AWG, reported that the company's Clearly Organic product line has grown beyond what management expected in its first year of deployment. Launching in April with 40 items, Clearly Organic is now up to 100 SKUs and is expected to add dozens more in the prepared foods, rice & grains, produce, meat and dairy categories in 2015.
"The program is doing very well and our retailer's customers are starting to seek out the brand. It's designed to give our retailers a competitive advantage in the marketplace and we provide them with point-of-sale marketing support and other promotional programs to keep everything fresh and constantly engage the customer," Mr. Oldright explained.
As far as the overall private label sector's growth is concerned, it continues to outpace the national brands, reaching new heights for sales and market share. According the latest industry sales data compiled by The Nielsen Company, private label unit market share in supermarkets has reached 23.4 percent and dollar market share is now at 19.4 percent. Total private label sales in the United States last year surpassed $112 billion.