Inflation and economic uncertainty won’t grow store brand share — but retailers can.
Historically, store brand sales and share have risen during periods of inflation and economic uncertainty, in which case private label ought to be riding an all-time high right about now. But since the pandemic first took hold in March 2020, the old rules no longer apply. In fact, although sales were up 4% from Oct. 2020 to Oct. 2021, store brand dollar share dropped 0.4 points during the period to 17.3%, reversing decades of growth. Same story on the edibles side where private label share fell from 18.8% in 2020 to 18.2% in Q3 2021, according to a Dec. 16 report from Chicago-based market research firm IRI.
SHOPPERS TRADED UP
What gives? The folks at IRI say consumers stuck at home during the pandemic reallocated funds they would have spent eating out or traveling
and traded up to more premium products, including national brands. (And here I thought all of those out-of-stocks early on would boost trial of store brands and win over the holdouts. Go figure.)
The good news for retailers missing those margins is they have the power to help put private label back in the black. One potent tool at their disposal is their own e-commerce platform, says IRI, which suggests borrowing a page from Walmart and featuring own brands on the first page of the site. Another idea is to offer private label products at a discount when preferred brands aren’t available. And the list goes on and on.
IRI also notes that the most successful private label programs function similar to those of CPG brands by focusing on the four Ps: packaging, promotion, placement and pricing. It called out the efforts of Walgreens, which offers cash back and other rewards to myWalgreens members who purchase its brands, and Aldi, which flips the store brand script by using top national brand products as high price anchors to highlight private label savings.
Other companies are attracting shoppers to their own brands by doubling down on health and wellness and sustainability. For example, Ahold Delhaize, Kroger and others continue to make their own brands cleaner by eliminating undesirable and artificial ingredients. Others are calling out sustainably sourced products and environmentally friendly packaging.
IRI also notes that trust is a key purchase driver among private label “loyalists” and suggests retailers leverage that trust to encourage trial of other store brand products. Perhaps some customized offers? Retailers also need to work harder to win back millennial and Gen Z consumers whose share of spend for private label fell the most during the past two years, according to IRI. There’s also room for improvement among households that receive SNAP benefits, which actually purchase fewer private label products than non-SNAP households.
CLUB & MASS BRIGHT SPOTS
Despite store brands’ recent struggles, there are some bright spots. For one thing, private label grew its share of edibles sales in both the club and mass channels. And store brands continue to dominate categories like fruit and seafood on the frozen side and pizza, cheesecake and eggs in refrigerated. But the fact remains that retailers can no longer rely on a down economy to boost private label share. Now, it’s up to them