Hitting refresh: Grocers update their store brands to stay top-of-mind with shoppersMarch 12, 2018
Food Dive | March 12, 2018 – Private label has become a significant revenue stream for grocers.
No longer considered “generic,” in-house brands command 17% of the market and bring in an estimated $120 billion per year, according to the Private Label Manufacturers Association. With mass merchandisers and e-tailers steadily growing their private labels, it’s likely that the explosive growth has only begun.
“Retailers want to deliver value to consumers, and private labels do that,” Christopher Huisinga, managing director and head of the consumer group for investment firm Stephens, told Food Dive in an email.
But just having a store brand on the shelf isn’t enough. As leading grocers such as Kroger invest in private-label innovation, and as discounters, dollar stores and Amazon ramp up their grocery focus, the need to regularly update private label portfolios has become a priority for retailers.
Expensive, time-consuming and vitally important
Store brand updates have accelerated recently. In the last 18 months, Kroger has introduced 1,000 new private label grocery and household items, totaling 30,000 products. Meanwhile, Hy-Vee announced it would remove at least 200 artificial ingredients and chemicals, including hydrogenated oils, artificial colors and high fructose corn syrup from 1,000 store-branded products. The revised packaging will have a “Clean Honest Ingredients” label.
Following a trend toward tiered brands, supermarket chain Southeastern Grocers transformed more than 3,000 private label products for its BI-LO and Winn Dixie stores into three new brands — SE Grocer Essentials, a budget line; SE Grocers, a brand that promotes quality and affordability; and Prestige; a premium line.
Changing the look or content of a private label brand is not a decision to be made lightly, according to Dave Harvey, vice president of thought leadership for Daymon, a branding and retail services provider. Private label brands typically need to be upgraded every three to five years in order to stay relevant with consumers.
“The average private brand program has over 3,000 SKU’s and [a refresh] can take 12 to 24 months and cost hundreds of thousands to several million dollars,” Harvey told Food Dive.
When private labels launch a new line, the rollout may be smaller — between 100 and 500 SKU’s, Harvey said — but more advanced research has been done to create the brand. To make a private label product more competitive, grocers must carefully research how to make a noticeable improvement over not only the existing private label, but national brand offerings as well.
Creating a strategic plan
Three years ago, PCC Community Markets decided to define its private label strategy. Until then, the grocer had a private brand, but it hadn’t created a significant advantage for the Seattle natural and organic food cooperative, said Darrell Vannoy, PCC’s vice president of merchandising.
“It was not part of a strategic plan,” he told Food Dive. “It didn’t define the value of what it offered to the consumer.”