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Will Classic Brands Survive on the New Battleground for Shelf Space?
There was a time when shoppers would peruse their local grocery aisle and easily spot their favorite tried and true classic brands without a hitch. But ever since the pandemic, times have changed as “the biggest U.S. food makers, already dealing with increased competition and shifting consumer tastes, now face an additional threat: supermarkets are taking away prime shelf space,” according to The Wall Street Journal.
Classic brands like Clorox and General Mills are up against a new challenge. Supermarkets are now relying on their own consumer data to reconfigure shelf space, sidelining these well-known names to introduce smaller up-and-comers. This shift in retail strategy means significant changes for these established companies “in favor of niche items and store brands that deliver higher margins and are often in higher demand.”
“Our retailers have better information now. So more of our conversation is about ‘How do we drive growth together?’”
Jeff Harmening, General Mills Chief Executive, via WSJ
Previously, it was common for retail brands to wield significant influence over how their products were displayed in grocery aisles. However, the power dynamic is now changing.
Retailers are prioritizing their own data-driven insights to determine the best product placement on store shelves. Particularly, Kroger has been investing heavily in data collection. The resulting insights have been shifting the dynamics of the relationships it has maintained with big brands over the years. The company is also tracking customer loyalty metrics to understand how clients interact with various brands.
Nowadays, retailers like Walmart and Kroger are getting savvier with how they gather and analyze data about their customers thanks to AI technology. High-tech methods such as video surveillance and customer walk rate analysis — which gauges the customer’s patience in finding an item before abandoning their search — are being employed. The most sought-after grocery items are strategically placed in the “strike zone,” the area directly below the customer’s eye level. This location usually guarantees the highest sales. Data-driven insights, rather than brand recommendations, are driving such decisions now.
“It used to be more of a personal relationship. It’s become cold, hard facts that make decisions.”
Former Kroger executive via WSJ
In the past, retailers often followed the advice of “category captains,” the top sellers of particular products. But today, grocery stores are also utilizing private-label products that are often priced lower than name brands to gain a competitive advantage. Grocers, which once advocated for these category captains for their product expertise and attractive slotting fees, are now veering toward a new strategy to drive sales growth. This approach includes promoting their own store-branded products over big-name brands.
The fall of classic brands in gaining prime shelf spots can also be attributed to their failure to keep pace with the evolving healthy food trends. As a result, grocers are also showcasing a changing array of products to reflect consumer trends, such as healthy snacks or infused beverages. Nielsen data shows that between 2013 and 2020, about 3.5% of the packaged-food market, totaling $17 billion at the time, had migrated from established brands to startups. Large, publicly traded food manufacturers saw a dwindling retail distribution, with a 2.8% decrease in their distribution points between 2019 and 2020. Brands, even iconic ones like General Mills, have started losing to smaller competitors and store brands, forcing them to devise new strategies to remain relevant.
The Bigger Picture of Decreased Shelf Space
In 2023, stores had fewer new products and less variety overall. According to The Wall Street Journal, new products accounted for only 2% of items, down from 5% in 2019. Fresh food offerings like dairy products, fruit, and deli meats in grocery stores also decreased by 15% to 20%. Many major companies trimmed their product lines, including packaged goods makers like Coca-Cola, Mondelez, Nestle, and Unilever along with toymaker Mattel and PVH, parent of Tommy Hilfiger and Calvin Klein. They did so in order to ease supply chain stress during the pandemic and cut costs as consumer spending on nonessential items decreased.
Many shoppers didn’t miss the reduced variations, which mostly affected unnoticed areas like special packaging. The list of discontinued brands or those in the process of being phased out includes “Newell Brands’ lines of Yankee candles, Unilever’s Sir Kensington’s dressing, Coke’s Odwalla juice, and regional brands like Northern Neck Ginger Ale.”
It turns out, having more variations doesn’t always stimulate growth. According to Bloomberg, Nestlé reported that a third of its more than 100,000 product versions contributed to just 1% of sales. Furthermore, studies show that consumers are more likely to make a purchase when they have fewer choices.
On the flip side, some industry experts caution against trimming the product list too much, saying it could stifle innovation and hurt smaller brands that rely on retailers for exposure.
This move toward less variety marks a big shift from the increase we previously saw, fueled by the internet, which trained shoppers to expect an almost infinite range of options. Before the pandemic, grocers “believed they had to carry everything to avoid losing customers to the store across the street,” Stefan Kalb, CEO of Shelf Engine, told The Wall Street Journal. He explained that “grocers are now saving money because they have fewer items to manage and that the slimming of product options is reducing food waste.”
Discussion Questions
Considering the shift toward data-driven shelf configurations in supermarkets, how does this trend intersect with the role of traditional marketing and consumer psychology, and what long-term implications might this have on the retail landscape? Given the diminishing prominence of classic brands and the rise of private labels and niche products, how can these established companies innovate to regain influence and remain competitive? Could the focus shift toward aspects beyond product placement, such as sustainability, ethical production, or direct-to-consumer strategies?
Poll
Loading …BrainTrust
Rachelle King
Retail Industry Thought Leader
Anil Patel
Founder & CEO, HotWax Commerce
Let’s be blunt: many traditional big brands are not particularly innovative. Just take a walk down the aisles at Target or Walmart and it’s very clear that most of the newness and interest is coming from smaller brands or from retailers’ private label products. On top of this, a lot of big brands increased prices sharply during the past few years. It is, therefore, not surprising that there has been a loss of shelf-space and, in some cases, market share.
Alongside this dynamic, many retailers are looking to reduce the number of options they offer to both improve economies of scale and because customers increasingly want edited choice. All of this points to an environment in which there will be an increasing battle for share of shelf.
Retailers relying on data to make decisions – what a novel idea! The game is all about sell-through. Armed with better data, retailers are making decisions based on outcomes vs. brand promises, and it’s paying off for them. We are way past the era of Tide detergent driving store traffic. Consumers are more savvy and so are retailers. The rise of private brands is a double-whammy for established brands: 1) consumers want/demand lower prices, and 2) retailers get better margins. As demand for some brands continue to diminish, they will be forced to scrape the old playbooks of ‘stack it high and watch them buy’, and bring something truly valuable to the consumer. Buying endcaps won’t save them. And while sustainability and ethical production play well in the press, consumers are still reluctant to buy if the price differential is too high.
I think the question is a little overwrought (surprise!): not too many classic brands are likely to disappear – they’re “classic” for a reason – but many of the more arcane variants will : i.e., the likelihood of, say, Colgate going away is zero, but the chance that one, or more, of its 15,837 flouride/taste/color/packaging variation offerings will is quite high (how many have already come and gone and no one noticed?) Does even a smallish store need 183 types/sizes of mustard? Which, I think, highlights the more likely extinction danger: it’s not big classic brands that are at risk, it’s new, small and marginal ones.
Shelf-stable mustards are the “canary in the coal mine” for excess grocery assortment. I never fail to check that section when I visit a store. Your count of 183 is not an exaggeration.
And yet only one (off) brand of taco shells! Where do they find these managers (and how do they keep their jobs)??
Truth is, this has been a long time coming. Slow but steady, private label and niche brands have eaten away at the lion share gap that big brands have long enjoyed. While we can point at the pandemic, consumers wanting more/less diversity in selection or more/less healthy foods; the bottom line is this responsibility sits squarely with big brands and their lack of meaningful innovation.
Private label and niche brands are not new; let’s stop pretending that the pandemic gave birth to them. What the pandemic did do is present an unavoidable opportunity for consumers to try private label, some, for the first time. In doing so, the years of concerted product quality improvements in private label got a captive audience. Literally. And, the result is what we see today: big brands having to defend their shelf space harder than ever before as the value proposition between private label and big brands shrinks.
Big brands matter and we need them. But along the way, to many line extensions took the place of meaningful innovation. Most big brands still pay or rent access to communicate with their own consumers. Many have no idea what consumers want and instead of acting from a point of authority and leadership, big brands are now on their heels, and bringing products to market intended to defend instead of lead, change or disrupt. Mass manufacturing delivers on a lot of things including the reach and scale that retailers need. But it can easily become a commodity without the right leadership, vision and strategy.
Big brands need to take responsibility for their share-of-shelf erosion and get back to meaningful innovation. Yes, retailers have more data than ever but they don’t own the big brands and therefore cannot (most will not) save them if they are not performing. And yes, consumers are more informed and empowered too; that’s why these relationships are so critical now.
For big brands, mass and scale are important but it’s not enough anymore. Today, quality (real quality) products, ethical sourcing, brand-consumer relationships and meaningful innovation are going to force big brands to grow up or be sqeezed out of the aisles.
In my view, the shift to data-driven shelf arrangements signals a transformation in how supermarkets are engaging with their customers. Traditional marketing’s influence is waning as retailers are now leveraging AI and customer data to optimize their product placement. This could significantly reshape the consumer psychology, and emphasize data-driven decisions over brand loyalty.
To counter the growing influence of private labels, classic brands need to innovate. Prioritizing sustainability, ethical practices, or adopting direct-to-consumer strategies could be crucial. Beyond product placement, focusing on values crucial to modern consumers may enable these established companies to reclaim influence and competitiveness in an evolving retail landscape.
This move towards streamlined product options reflects changing expectations that believes in cost-saving, and waste reduction.
Ongoing brand building, competitive analysis and retail media ad spend can help brands stay relevant as grocery evolves.
Brands can treat private labels as worthy rivals and monitor their moves to inform their product development and promotion strategies.
Grocers’ focus could shift to consumer demand for value, wellness, sustainability and diversity.
Between 2015 and 2022, the market share of store brands fluctuated, reaching a peak of 17.9 percent in 2019. In the second quarter of 2022, private labels had a market share of 14.4 percent in North America.[Statistica] If we look back further, we will find that PL brands spike in difficult economic times and recede as the economy gets better. The highest level of PL was reached in the early 80s at 20%.
Am I reading a contradiction in today’s discussion? 1. Retailers are moving to shelf placement based on movement, 2. Retailers are pushing PL.
Don’t bet against the large CPG companies. They have the resources to compete, including buying successful new brands. They also provide retailers with over-and-above funds that are greater than the retailers’ annual bottom line.
More than ever, traditional supermarkets will be the go-to place for iconic national brands as those consumers prefering alternatives are shopping Trader Joe’s, Whole Foods and Aldi.
As a former buyer, data-driven decision-making is not a new concept to those of us who were expected to make the right decision about what products we carried, and how prominently we displayed them on store shelves.
The fact is that brands also have access to more data today, such as ratings & reviews, consumer insights, and store-level sales data. Brands also have the opportunity to invest in retail media placements, including paid search, that impact shopper behavior.
Brand owners have the challenge of harnessing data, just as retailers do, to formulate more effective strategies to promote their brand and specific products to consumers. don’t complain…do your homework! Additionally, please be clear that digital placements are the “front door” of modern retail, and investments in your digital presence impact in-store sales just as it does online sales. Are you studying the data and taking action?
There are big doses of both psychology and math at work here. And while the big, classic brands are at low risk of disappearing, the tilt of the earths axis has indeed shifted when it comes to floor space and shelf space allocation. The big brands have been happy to pay the slotting fees that maintained their prime shelf space. But that willingness to pay the fees doesn’t mean that they would win a head-to-head taste/price/value test when the customer finally experimented. Customers did indeed experiment during the pandemic, and discovered that private labels are a great deal! Game changer. Win/win for retailers and customers alike. Bad news for the big brands. The customer wins at the taste/price/value level. The retailer wins at the differentiation and loyalty level, with the huge added bonus is winning at the margin % and margin $$$ level. Bad news for the big brands.
In today’s market, differentiation and distinction are more important than ever. The big, national brands don’t provide that. Emerging brands and private labels do. And with customers now embracing these brands as never before, they represent a multiple win for the retailers. So retailers are remixing their product portfolios accordingly.
A very comprehensive article discussing what’s going on at the retail shelves. No doubt the major brands have not been as innovative as necessary. Plus, the plethora of various sizes, packaging, etc. have led to consumer flight.
However, not to be lost in this discussion is that non national branded products provide retailers with the opportunity to develop a positive differentiation vis a vis their competitors.
Retailers need to think lol a brand & act like a retailer. Unique brands & store offerings set the retailer above the competitive fray & give customers permission to drive past one retailer in search of one uniquely designed to satisfy their needs.
I would love to see the day when CPG and office products retailers actually focus on making profit through selling unique and well-selected inventory, rather than ever-inflating allowances, slotting and change fees, competitor buy-downs, etc.
Private label products give retailers the ability to differentiate, cater to changing customer tastes, and grow margins.
Big brands should absolutely optimize their range based on sales, demand and competition. No one needs hundreds of choices for ‘basic’ products.
Data is indeed the most valuable currency available. And, retailers have LOTS of it. Combine this information with new technology solutions, and the ability to manage shelf space and assortment plans can be done more cost-effectively, efficiently, and nimbly at the retail level. Therefore, reliance on traditional big brands to guide overall shelf strategy will continue to diminish. However, there remain several key risks:
Final recommendations: a) remain collaborative with traditional big brands and ensure a shared commitment to private label; b) tap external partners who can help bring shelf strategies to life in a timely and consistent manner; and c) personalize, customize, and rationalize assortments and shelf placement at a local level.
Grocers seeking to position, higher margin, private label products is not a new phenomenon. Private label has been huge business for many years – with some grocers even having multiple tiers of private label items representing good-better-best.
The task of the category manager is to optimise the profit for that category – and leveraging data to determine what should get shelf space and what should not, the classic keep-add-drop process, has been using data as a key tool for many years.
It only stands to reason that as more date becomes available the assortments will become more and more localised and specific. We are moving into a time where the ability to localise an assortment in a store is limited by the ability to execute downstream of the data driven decision. The execution limitation could be system related or indeed physical capacity in adjusting the assortment.
Major brands have significant marketing budgets – something they have long discussed with retailers during promotion related negotiations. Switching the focus of these to making them more personalised – for example targeting consumers in a specific local area where products are stocked – can be a key way to leverage data to out-manoeuvre smaller up-start type rivals.
I believe that many consumers inherently know that classic brands carry a lot of marketing costs in the price, while smaller, “fresher” brands (especially at the supermarket) provide more interest in different categories (like, say, bottled pesto sauce. Okay, I just outed myself). Generic, private label brands are about value, and that is about all they provide. Being able to market effectively outside of traditional channels will continue to win the day in the minds of consumers.
Classic brands will continue have a significant portion of the space in many grocery retailers. Although their share of space has diminished in certain areas, they should have the operational ability as well as business knowhow to retain or grow share in the future. The truth is that many classic brands own niche brands that are not known by the average consumer (Clorox- Burt’s Bees, General Mills- Cascadian Farms, Blue Buffalo). Classic brands will retain share in the long run because they will likely buy upstart brands that have created an exciting new value propositions for consumers.
Three keys going forward for big brands is collaboration expertise, leadership in consumer insight and continuous innovation. The playing field is even or slanted to retailers, so brands need to be all in in collaboration and be able to cater to the retailer’s specific consumer. Big CPGs have been super knowledgeable about category shoppers and will need continue to ramp up to leverage those uncommon insights, predicting emerging trends with category implications and finding win-win opportunities to build shopper loyalty. Innovation is the last piece and that is not only in product taste/performance, but packaging/sustainability, promo/retail media tests and bringing best practices learned elsewhere, as new ways to stimulate sales at shelf or online for retailers.
The legacy shopper experience format no longer is supported by real world data. Up and comer brands are connecting more with shoppers than stayed brands who have lost their luster and failed to innovate. Private brands are compelling for both the retailer (margins) and the consumer (buyer shift to value). This all just a natural extension and we are just beginning. Computer vision will show that even the “strike zone” theory of just below eye level is less effective than edges of the planogram, which we have seen in grocery end caps specifically. Data will overturn traditional thinking throughout. Art will give way to science.
And retailers will be able to charge more to traditional brands to compete for premium marketing placement and platforms like retail media, or they will be left behind. This is an area where bigger brands have a competitive advantage with better access to large volumes of data and bigger budgets to command premium shopper marketing as a counterbalance to the best shopper experience.
It’s an exciting time. And it’s about damn time.
The wild card in this battle for shelf space is the better quality of store brands that have a price advantage over classic brands, which will never lower their prices to pre-inflation levels. Savvy shoppers make buying decisions nowadays based on quality and price.
Big brands losing marketshare, interest, or loyalty isn’t a surprise. From a food perspective, although many brands were created several decades ago for convenience sake and are a foundation in the grocery industry, the quality often isn’t on par with other newer or locally made options. And customers have many more choices now.
But the increase in data-driven decisions at large grocery chains will continue to squeeze placement opportunities, so these brands need to remained focus on promotion, telling their story, providing grocers value in media $. For some brands, they’ll need to go further by changing or raising food quality levels to maintain shelf space at independent grocers.
Big brands losing marketshare, interest, or loyalty shouldn’t be a surprise. From a food perspective, although many brands were created several decades ago for convenience sake and are a foundation in the grocery industry, the quality often isn’t on par with other newer or locally made options.
The increase in data-driven decisions at large grocery chains will continue to squeeze placement opportunities, so these brands need to remained focus on promotion, telling their story, providing grocers value in media $. For some brands, they’ll need to go further by changing or raising food quality levels to maintain shelf space at independent grocers.
Consumers want to find their preferred brands on the shelves and grocers want products flying off them.
Data makes it possible, and if established companies want data to justify their grocery presence they need to market, adapt, and evolve their products and brand — it applies to all consumer distribution channels.
The diminishing prominence of classic brands in favor of private labels and niche products signals a need for established companies to innovate. To thrive in the current retail landscape, classic brands may need to invest in forward-thinking marketing strategies, enhance product differentiation, and leverage consumer insights to remain relevant and competitive. For example, creating partnerships with other retailers and sharing consumer information can help enhance shelf position or improve engagement at the shelf level, as well as improve overall sales for both traditional brands and the retailer. The key takeaway is that brands need to align with consumer values and preferences, and the success of classic brands on the new shelf-space battleground may hinge on their ability to embrace change, engage with evolving consumer preferences, and demonstrate agility in response to emerging market trends.