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November 2023

The pandemic ignited store brand growth, but lingering inflation and renewed retailer focus are taking it to new heights. (Aldi’s helping, too.)

Prior to 2020, private label growth was beginning to level out, leading some to believe that store brand share in the United States had finally topped out. But once the pandemic hit and supply chain issues created widespread national brand out-of-stocks, many shoppers reached for private brands instead, generating a wave of new product trial. And when their regular supermarket didn’t have what they needed, consumers also started shopping new channels, including deep discounters such as Aldi where private label rep- resents the bulk of the assortment (and standards for quality are high). As a result, both sales and share began to rise.

“What’s true with private label is that when people are more engaged with it, as long as it meets their expectations, they’ll try it again in the same or an adjacent cate- gory because they recognize it’s as good or better than the national brand — and it provides some relief for their budgets,” explains Mary Ellen Lynch, principal, center store, for Chicago-based market research firm Circana.

Henry Umphress

But do shoppers really think private brand quality is as good as or better than national brands — or is it more about saving money? A recent consumer study fielded by Stamford, Conn.-based Daymon found that while 83% of consumers do view store brands as a better value for the money than national brands (up 14 per- centage points from 2021), a whopping 85% of consumers believe private brand quality is, indeed, equal to or better than national brands. “Another 93% of consumers said they trust private brands as much as or more than national brands,” says Henry Umphress, Daymon’s director of client services.


That said, inflation has absolutely helped drive private label growth. In fact, once the national brands got their supply chain issues sorted out, store brands lost some of their peak pandemic share gains (though they were still higher than pre-pandemic). But growth picked up again in 2022 and 2023 as high inflation kicked in. During the 52 weeks ended Oct. 8, private label’s share of total food and beverage sales climbed 0.6 percentage points (versus the same period a year ago) to 19.5% in dollars and 0.8% per- centage points to 22.9% in units, according to Circana. (It’s worth noting, however, that dairy represents a disproportionate share of private label sales, and 26% of total private label food and beverage dollar growth was driven by dairy — particularly eggs.)

‘The biggest retailers in particular have focused on really building brands versus just having a brand on the shelf. They want to be the preferred choice, not just a choice.’

In the frozen department, private brand share rose 0.3 percentage points to 23.3% in dollars and 0.6 percentage points to 24.3% in units — even higher than its share during the peak of the pandemic in both cases. However, growth was even more significant in the dairy-heavy refrigerated department where store brand dollar share jumped 0.8 percentage points to 33.3% and unit share shot up 0.9 points to 34.9% — both all-time highs.

Mary Ellen Lynch

Those results are supported by Daymon’s recent consumer research, which found that 44% of consumers are buying more private brands today than a year ago. Almost as many (34%) said they plan to purchase even more private label in the coming year. But what really ought to excite retailers and manufacturers is that although value is the No. 1 purchase driver, 63% of shoppers say they’re buying more store brands because of the improved quality.

Lynch says she’s not surprised. “Retailers have given store brands more attention for a variety of reasons — margin optimization, differentiation, etc. — but also stability of supply,” a vulnerability that was exposed during the pandemic. “They want to make sure that if the nation- al brand can’t supply a particular product, they’ll still be able to offer shoppers a private label alternative,” she says. Beyond that, though, “The biggest retailers in particular have focused on really building brands versus just having a brand on the shelf. They want to be the preferred choice, not just a choice,” Lynch explains. Some have been so successful in that regard that consumers can’t always tell the difference between national brands and store brands, which bodes well for the segment’s future, she adds.

Industry observers say some of retailers’ renewed attention on their private label programs can also be traced to the entry of Aldi into their market, forcing them to up their own brand game. (Case in point: Walmart’s recent rollout of a $30 Great Value Thanksgiving basket to counter Aldi price cuts on more than 70 holiday classics). “Aldi’s growing popularity hasn’t gone unnoticed by other retailers, who have made private label a strategic imperative,” says one manufacturer, who can’t wait to see who wins Thanksgiving this year. “It’s going to be a fierce retailer battle,” he predicts. “But consumers will be the real winners.”


While the “Aldi effect” combined with lingering inflation has prompted many retailers to build out their opening price point value tier, the premium tier has enjoyed the most growth between 2020 and 2022, reports Katherine Burkhardt, director of brand strategy at Daymon. “Even though it commands higher than mainstream-tier price points and inflation has caused consumers to tighten their wallets, the premium tier is becoming an increasingly important part of every retailer’s assortment,” she says, citing growing consumer interest in new cuisines, specialty ingredients and convenience-driven formats.

Across tiers, private label is outperforming the category as a whole in 88% of the top 25 refrigerated and frozen categories, reports Umphress. Among those, he continues, private label dollar growth during the most recent 52 weeks was highest in fresh eggs (+25%), natural cheese (+7%), yogurt (+20%), creamers (+17%) and butter/butter blends (+19%) in the refrigerated department, and potatoes/onions (43%), ice cream/sherbet (+10%), pizza (+3%), novelties (+6%) and breakfast foods (+16%) in the frozen department.

However, Lynch prefers to look at unit sales since categories such as eggs, which saw some wild price swings during the past year, can skew results. Top private label unit share gainers tend to be in less differentiated categories (think plain potatoes, whip toppings and mixed vegetables), she explains. But there are some exceptions. For example, unit sales of store brand snack rolls/appetizers were up 3.5% during the most recent 52 weeks in the face of a 4.5% decline for the subcategory as a whole. And private label fries edged up 0.8% while sales for the subcategory dropped 3.0% (perhaps due to some pretty significant price increases across the board). “Both of those subcategories are benefitting from multiple macro trends including snacking, the escalating price of dining out (so consumers are recreating restaurant experiences at home), and growing enthusiasm for air fryer preparation,” Lynch explains.

But there are other factors at work as well. For example, says Lynch, both private label plain vegetables and frozen seafood are likely benefitting from national brand price hikes that outpaced store brand price increases — as well as a slight decrease in the total number of national brand SKUs on the shelf. Same story in the refrigerated pizza and plant-based milk categories where Lynch says national brand prices are rising faster than private label prices — “thus increasing the private brand value proposition” — and branded SKU counts are down slightly.

In which categories is store brand share not growing? Private label frozen dinners and entrees continue to underperform the category as a whole (though it’s struggling, too). Not only is the category at odds with the current trend toward fresh grab-and-go meals and meal kits, “There’s also a lot of differentiation from the national brands,” which continue to churn out products compatible with various lifestyle diets as well as celebrity chef-created dishes, says Lynch. “So it’s hard for private label to keep up.”

‘Nearly all retailers surveyed — 97% — say they are looking to create additional space to expand private brands in frozen, while 90% are looking to create space in refrigerated.’

For much the same reason, she continues, certain on-trend refrigerated beverage subcategories have also been a challenge for store brands (though private label ready-to-drink coffee recently registered some strong growth, albeit off of a smallish base).


So where are the opportunities for additional private label growth? Lynch says that approximately 80% of today’s store brands are national brand equivalents, “so the basics are already covered.” As a result, she continues, “The way to get more out of the segment is to add more value or premium items.” While less differentiated products represent the low-hanging fruit, Lynch admits that a lot of those items are already being offered. Still, those commodity products are the entry point to private label for younger, cash-strapped consumers, so it’s important to get them right, she says. “That’s how you get them in.”

To squeeze more out of categories where private label dollar shares exceed 50% (butter, half and half, frozen veggies and juices, etc.), Umphress suggests retailers eliminate duplication, “which would improve category productivity and free up shelf space for new innovation.”

At the other end of the spectrum, Lynch sees opportunity in more differentiated products that align with major macro trends such as snacking, simple ingredients/less processed, etc.

Umphress adds sustainability, functional ingredients, portion control, portability and convenience, including ready-to-heat and -eat items and all-in-one meal kits, to that list as well. “Additionally, health and wellness remain paramount,” he says. “Daymon research finds 83% of consumers are interested in living a healthy lifestyle.” But are retailers really prepared to innovate in these areas or will they continue to let national brands take the lead?

Well, according to Daymon’s research, private label manufacturers are doing their part, with 74% reporting plans to invest in product innovation in the coming year while 79% are working to increase capacity. What’s significant, though, is that re- tailers appear to be making room for those new items. “Nearly all retailers surveyed — 97% — say they are looking to create additional space to expand private brands in frozen, while 90% are looking to create space in refrigerated,” reports Umphress. Moreover, “With competition to innovate heating up, 95% of retailers surveyed say they are willing to accept new item cut-ins outside of the traditional reset cadence.

“Retailers that lean into private brand innovation and growth are setting themselves up for competitive differentiation, increased loyalty and the opportunity to execute against white space that better meets shopper needs,” he adds.


While just about everyone purchases store brands to some degree, Gen X and Boomer households spend a slightly lower share of their dollars on private label. But both younger and older Millennials, who are being hit the hardest by inflation, are really leaning in to private brands, says Lynch. “They’re at the stage where their expenses are high. They’ve got mort- gages, kids and student loan debt and, in some cases, that’s all being com- pounded by a return to in-person work. So they’re really feeling the pinch,” she explains.

But that cash-strapped demographic is the second-largest after Baby Boomers, which bodes well for continued private label growth, according to Lynch. What about when inflation eases? “I expect sales will continue to grow as the quality and mix of products continues to expand, providing consumers with more opportunities to experience private brands,” she answers. Are we talking European-type shares? That might be a stretch, given the fragmentation of the U.S. market and Americans’ continued affinity for national brands, says Lynch. “But in frozen and refrigerated, there’s no doubt private label will continue to put pressure on national brands.”

Denise Leathers

Denise Leathers

Denise is the Editorial Director for Frozen & Refrigerated Buyer.

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