PL Bounces Back

November 14, 2017

Frozen & Refrigerated Buyer | November 8, 2017 – What difference 12 months makes! Last year at this time, we were resigning ourselves to the fact that private label shares may have plateaued – and store brands in the United States might never enjoy the kind of success they have in Europe. But that was before one of the most momentous years in supermarket history. From Amazon’s acquisition of Whole Foods and the acceleration of online shopping to the opening of Lidl’s first stateside store, things have changed rather remarkably. As a result, many industry observers now expect private label shared to grow pretty dramatically in the next decade. In fact, a new report from Wilton, Conn.-based Cadent Consulting suggests private label dollar share could swell as much as 8.0 points to 25.7% by 2027.

The change is already underway. During the 52 weeks ended Aug. 26, reports Nielsen, private label dollar sales across channels rose 1.0% while national brand sales fell 0.4%, bosting store bran sure 0.2 points to 17.8%. However, share gains were significantly higher in the dairy and frozen departments. Although private label dairy dollar sales were down 1.3% (and national brand sales 4.8%), store brand share of the department jumped 0.8 points to 34.2%, highest among 15 departments tracked by Nielsen. But in terms of sales growth, the frozen department led the way: private label sales shot up 2.9% versus a 1% loss for national brands, lifting store brand share 0.6 points to 21.3%. Why did private label do so well in the department?

Retailers Double-Down on PL Frozens

Manufacturers cite gains at both ends of the spectrum -in categories where store brands dominate as well as those where it’s underdeveloped. As for the former, says Minneapolis-based consultant Craig Espelian, some retailers doubled down in categories like seafood an fruit where there’s little need for national brand alternative, and certainly not more than one. For example, he says, “At Costco, you really can’t buy national brand IQF shrimp, it’s all Kirkland Signature.” And shoppers are fine with it, prompting more retailers to adopt a similar strategy. As a result, store brand shares actually grew not only in fruit (+2.3 points to 69.2%) and seafood (+5.5 points to 47.3%) but juice (+0.9 points to 39.6%), potatoes and onion rings (+0.8 points to 36.3%), vegetables (+0.4 points to 40.2%), meat (+9.4 points to 48.1%) and poultry (+0.1 point to 48.5%).

Private label also made strides in frozen segments where its shares are only half of what they should be, including the two largest (non-ice cream) frozen catgeories: entrees (9.2% share) and pizza (11.7% share). In both segments, but particularly entrees (+13.1%), store brand filled some of that white space in the past year. They also made up a lot of gain in the appetizers (+7.4%) and breakfast sandwhiches (+13.0%) categories, where private label shares are also lower than average,

While large national brands in the frozen department have struggled to adapt to changing consumer needs around health and wellness, “Private brands have responded quickly,” reports Lisa St. Germain, senior manager of category solutions at Stamford, Connn.-based Daymon. However, “The biggest impact is being made by products that bridge the gap between healthy and tasty, especially those with unique flavor profiles,” she says, citing items like Rasperry Chipotle Baby Brie and frozen Hatch Chile Cheese Puffs. A lot of that action has been on the premium side – evidenced by a 3.2 point gap between private label dollar gains (+2.9%) and unit losses (-0.3%) in the department – particularly natural and organic. Although store brands are relatively underdeveloped, “There is considerable upside potential for private label in organic and specialty segments because these are categories where the benefits clearly outweigh the brand,” says Cadent managing partner Don Stauart, citing the blockbuster success of Kroger’s Simple Truth label as evidence. “If you build trust with clear, transparent, organic and other better-for-you attributes, shoppers will respond.” An added bonus: consumers are used to paying higher prices for such products meaning retailers can take healthier margins.

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