Pumping Up Private BrandsNovember 13, 2017
Store Brands | November 8, 2017 – In January, Store Brands provided exclusive analysis of the “Power of Private Brands,” an in-depth report from the Food Marketing Institute, IRI and Daymon stating that private brands at supermarkets and regional grocers, hampered by deflation and a decline of grocery trips haven’t kept up with national brand sales the last two years, but the report stressed that supermarkets and grocers can take advantage of the growth potential of private brands by customizing products, recognizing the need to invest to drive store brand innovation and embracing a wider range of promotion vehicles, incuding emerging social media platforms.
“It will be a lot of hard work and will require grocery retailers to think differently about their store brands, but there is a lot of opportunity for them [with private brands],” said Mark McKeown, client insights principal at IRI.
Kristof Duna, director of private brand at Merchants Distributors Inc. in Hickory N.C., and co-chair of the FMI Private Brands Council’s research and education committee, said the research justifies what he is seeing in the marketplace with private brands and grocery. But while grocers have lost dollar share, Duna believes they can regain it by investing more in store brand innovation.
“There are still retailers that want to take the benefits of private brands without really looking at the investment needed to keep them on the cutting edge,” Duna said.
Dave Harvey, Daymon’s vice president for global thought leadership, said retailers simply need to think differently to distinguish their private brand offerings to increase sales.
“What will drive future growth in private label are categories actually being created by retailers themselves,” Harvey stated.
Here are the key highlights from the study:
- Nearly all U.S. households – 96 percent – are purchasing some form of private brand at retail outlets that sell food products.
- Private brand performance has been on a declining trajectory at grocery that outpaces that of national brands, and the performance gap has widened over time.
- Much of the private brand decline at grocery was due to the deflationary impact of dollar sales in dairy, eggs and cheese.
- Product customization is the biggest opportunity for private brand growth.
- The industry views the biggest threat to private brands to be a lack of capital investment to drive innovation.,
- Organic private brand represents a small but growing segment of the industry.
- Millennials are embracing private brands and are more likely to be heavy buyers.
- The best store brand quality perceptions belong to perimeter categories – 74 percent quality perception for dairy, 70 percent for fresh produce and 68 percent for bakery.