Private Label: Grocers Latch Onto Key Emerging Trends to 'Outstrip' Rivals
- Key Takeaways
- Given that a superior private label offering is key to differentiation, and with the rising consumer acceptance of such items, food retailers are embracing own brands more than ever, with some developing comprehensive strategies in this area.
- When developing new private label items, retailers and manufacturers must incorporate such emerging trends as simple ingredients, local sourcing and an emphasis on fresh perimeter products, while balancing quality and cost considerations.
- Promoting and merchandising private label products for maximum appeal to shoppers includes performing extensive research, marketing to customers by traditional and digital means, and providing pertinent information.
Doug Baker, VP, private brands and technology at the Arlington, Va.-based Food Marketing Institute (FMI), agrees that store brands are a key way for grocers to outstrip their rivals.
“A retailer’s private brand is its point of differentiation.” He goes on to note that among the trade organization’s members who participated in “The Food Retailing Industry Speaks 2018" report, “retailers plan to make growing investments in this business segment, with many forecasting bigger space and SKU allocations for private brands in the next two years. Furthermore, private brands influence 46 percent of consumers in their choice of where to shop, according to IRI data in FMI’s ‘The Power of Private Brands.’”
Along with bigger investments, however, grocers must develop a comprehensive game plan for their own brands.
“‘Set it and forget it’ isn’t a strategy that works in retail these days,” observes Peranick. “Shoppers want more, and they’re challenging retailers to pioneer. Today, 53 percent of consumers on average say they shop at a store specifically for its private brand. And the more unique the private-brand assortment is, the more loyal shoppers are, as proven by Daymon’s research. Faced with an ongoing battle to drive traffic and store affinity, retailers must continue to push the envelope.”
Her advice for how to do that is clear: “Pivoting from category-led updates to consumer-centric platform innovation across the store will help raise the profile of your private-brand program and better set you apart from the competition.”
Among the grocers that have formulated their own comprehensive private label strategies is Carlisle, Pa.-based Ahold Delhaize USA, No. 4 on Progressive Grocer's 2018 Super 50 list of the top grocers in the United States.
“Over the past several years, the Our Family brand has been working on a Clean Ingredient Initiative, focusing on providing cleaner products to our customers by removing synthetic colors, MSG and other key ingredients,” says Andrea Anson, SpartanNash’s director, quality assurance and food safety. “The Clean Ingredient Initiative’s purpose is to not only provide products that cater to an evolving consumer, but to educate the consumer in a market where information and product options are numerous and overwhelming.”
The initiative currently encompasses more than 400 private-brand products.
As far as actual items on shelves, Anson cites such 2018 rollouts as four SKUs of Our Family ice cream that contain only four or five ingredients, such as milk, sugar, cream and the appropriate flavoring; core soup offerings that now contain no added MSG; fruit and grain bars that have been reformulated to remove synthetic colors; and, under SpartanNash’s Open Acres fresh brand, a new hummus line providing a plant-based protein solution for consumers.
Open Acres also features such items as specialty potatoes, fresh salsa, artisan bacon, ethically sourced seasoned seafood and, in partnership with craft brewery Founders, craft beer brats. SpartanNash additionally offers the Culinary Tours line, which addresses indulgent and premium segments of the business with on-trend flavors and unique products, and Good to Go, a brand providing ready-to-eat meal solutions, including entrées, sides and desserts.
“A key area of focus for Retail Business Services is our Nature’s Promise brand,” observes De Paoli. “This brand is already free from more than 100 unwanted ingredients, and as part of our commitment to remove all artificial ingredients from all our private-brand offerings, the Nature’s Promise brand will be further strengthened.”
In 2018, Albertsons introduced more than 1,000 new products, many under the O Organics and Open Nature brands, according to White, who adds: “We’ll continue to aggressively roll out new organic and natural products to meet that rising demand. We’re really excited about the opportunities in plant-based offerings. We plan to keep pace with that trend with new product releases throughout 2019.”
The Quality Question
Retailers must bear in mind, however, that product quality is an important consideration, both in developing items and promoting them to consumers, although it can be tricky to balance quality against cost.
“Gone are the days of the plain white ‘me too’ package,” asserts Karen Strauss, principal at Wilton, Conn.-based Cadent Consulting Group. “Private label needs to have the right combination of quality, selection and price, and needs to deliver on shoppers’ key decision drivers of lower cost and good value/quality relative to national brands.”
Ultimately, she adds: “Keeping costs low while delivering quality products is important for continued private label success. Turning a profit will come in the form of the grocer’s ability to attract consumers to their lower priced, good-tasting, high-quality private label products.”
“There is a role for items that are the lowest price on the shelf to appeal to the shopper who wants as much variety as possible but doesn’t have a lot of disposable income,” notes Fair Trade USA’s Ayers. “These items should still be high-quality. They probably won’t drive the biggest margin, but they will drive a lot of volume.”