Grocery shelf view

There’s little doubt that the now infamous food and nonfood shortages of the first wave of the pandemic in March 2020 helped push consumers toward private label products — many for the first time: as reported by Storebrands on this time period, “First quarter dollar sales for store brands across all retail outlets rose nearly 15%, knocking on the door of $5 billion, year over year, per Nielsen and the Private Label Manufacturers Association (PLMA).”

Our own analysis of the success of private label during the pandemic from our Food Sourcing in America July/August 2020 report (which provides insights from Summer 2020) finds that availability (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 (Figure 1).

 Figure 1: During the Pandemic, Availability and Price Have Influenced Trial Use of Private Label 
(Source: Food Sourcing in America July/August 2020, The Hartman Group, Inc.)

Private-label during the pandemic

Food Sourcing in America also finds that while consumers may see store brands as a way to save on quality products, it is not exclusively those with the lowest income levels who have leaned on private label: consumers in a range of socioeconomic tiers show similar propensities to purchase store brands during the pandemic. Specifically, with erosions in economic certainty and job security, consumers across the income spectrum are turning to thrift behaviors to mitigate any actual or potential economic challenges. Instead, differences in private label usage tend to fall along other demographic lines, with Millennials and Gen X, families with children, and Hispanic and African American shoppers all tending to rely more on private label.

What Consumers Are Looking for in Private Label

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 and other agricultural certifications.

With so many consumers trial using private label during the pandemic, we examined some of the key properties they seek out when shopping. Most notably, when first trying private label, consumers are attracted to simplicity in terms of both product type and ingredient list:

Product Type: Consumers tend to be most open to swapping out name brand for private label in products that have simple ingredients and are minimally processed, such as those they use as raw ingredients. If consumers are sufficiently convinced of the quality and value a private label brand can offer in these products, they are more willing to try other categories, including those that involve greater levels of processing or culinary development, such as sauces, snacks, or meal helpers.

As one consumer told us: “I doubt I did a lot of comparison when I first switched to store brands. A lot of the products that we buy the store brand version of are not super complicated items — like canned corn. It’s just corn and water. But I have to check each product.”

Ingredient List: Looking at the ingredient panel allows consumers to not only assess the quality of a given product but to develop trust in a new brand — private label or otherwise. As consumers are considering a move away from name brand products, the presence of simple, kitchen-level ingredients can be a quick and easy indicator that provides reassurance, validating the decision to select a lower-cost product without compromising health and quality.

Another consumer commented on ingredient lists in private label: “I was at Winco the other day, and I was going to buy the store brand pasta. When I compared it to the name brand, though, it had a lot more junk in it. The ingredients weren’t high quality or similar enough to the name brand. Some were unhealthy or could have changed the quality or taste of the pasta.”

Private Label Going Forward

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.

Lower prices can be an attractive pull for consumers, particularly during this period of economic uncertainty. While some consumers are swapping out products for less expensive versions because of disruptions to their household income, others are making such shifts in anticipation of potential economic challenges ahead.

The familiarity of well-known name brands can be an incentive to purchase during times marked by change and anxiety. However, private label brands are increasingly gaining consumer trust through a combination of price, quality, and — in some cases — premium attributes.

Moreover, there is a reciprocal relationship between trust in a retailer and trust in private label products. When they meet consumer needs, store-brand products can help to develop trust in a retailer, and trusted retailers can inspire confidence in their own brands.

The evolution of private label is a topic The Hartman Group will explore in depth in 2021 in the syndicated study Private Label and National Brands 2021. This study will examine relationships that exist between perceptions of store brands and retailers as well as aspects of private label that are particularly salient to today’s consumers, including opportunities for innovation and any evolution in the role of store brands brought on by the tumultuous year 2020.

To learn more about our syndicated research for 2021 and how to sign up early to take advantage of special pricing, contact: blaine@hartman-group.com