Ride the Wave: Where Are Private Label Brands Going Next?
Riding a wave of popularity driven in part by the now infamous CPG shortages experienced at the start of the pandemic, the rising power of grocery private label brands was recently highlighted by big results reported at the largest U.S. grocery chains, including Kroger. As noted in a Store Brands article:
"Kroger’s private brands division had its “best year ever in 2020,” exceeding $26.2 billion in sales last year, and Simple Truth surpassed $3 billion in annual sales for the first time. The milestone numbers were presented during Kroger’s fourth-quarter call by Rodney McMullen, chairman and CEO of Kroger. For the quarter ended Jan. 30, Simple Truth grew 18% in sales, as he said healthy eating was a bright spot across the company’s numbers. He said the plant-based arm of Simple Truth is also continuing to grow in trial rates and strengthening in repeat rates."
Our own analysis of the success of private label during the pandemic from our Food Sourcing in America report finds that availability of traditional SKUs (or a lack thereof) and price have been key in driving trial use of private label products. Building on a perceived intersection of ever-growing quality and value in store brands, shoppers have been quite enthusiastic about continuing to purchase them: Food Sourcing in America found that compared to before the pandemic, one-fifth (22%) of shoppers said they now rely more on private label products and half of these (52%) say they expect to continue purchasing store brands even as major concerns about COVID-19 subside.
Increased quality in private label has been a rising influence in the success of store brands that we’ve been tracking at The Hartman Group for years: Food Sourcing in America notes that when private label lines or products — such as those found at Lidl, Trader Joe’s, H-E-B, and Costco — take on their own unique brand identity, they can drive trust, loyalty, and dedication to a retailer, with consumers often going out of their way to visit a store that sells their favorite store brand items. Often this behavior results when store brands excel at integrating premium attributes, such as authentic global flavors or sustainable distinctions, including organic, plant-based, and other agricultural certifications.
Private label has been attracting significant attention for many years, but the particular circumstances of the pandemic have provided retailers with additional opportunities to convert customers to their own brands.
The evolution of private label is a topic The Hartman Group is currently exploring in the syndicated study Brand Ambition: Private Brands and Beyond. This study examines the role of a brand in today’s consumer-driven marketplace and addresses questions like: What is the relevance of brand today? Has its role diminished or morphed into a new function? What do consumers seek from a brand, other than specific product attributes? How do consumers evaluate brand against a multitude of product attributes? What is happening with brand loyalty — how sticky are consumers’ favorite brands? And how do these dynamics play out for different types of brands (established national brands, local choices, emerging brands, and private brands)? An overview of the study is available here.
Report: Food Sourcing in America