When It Comes to Private Brands, What Are Shoppers Buying?

By Doug Baker, Vice President, Industry Relations, Private Brands, Technology, Food Marketing Institute

Food retailers increasingly offer a wider variety of private brands options in their stores and are strengthening their private brands value proposition. But it all comes down to which private brands categories shoppers actually purchase. That’s what we examined with IRI in Power of Private Brands: At the Register 2018 report.

In general, private brands are purchased by a majority of U.S. households with U.S. sales totaling $138 billion in calendar year 2017 across multiple retail outlets and convenience. In the grocery channel, private brand sales totaled $68 billion during the same time period. While overall private brand sales improved, it’s important to consider consumer trends in addition to where they are spending their food dollars. Supermarkets have stabilized their role as the “primary store,” but this status matters less as shoppers add on other non-traditional channels as frequently used sources. Remaining primary with consumers today does not mean maintaining a steady share of grocery trips, which is why we’re seeing private brands performing best outside of grocery. IRI’s experience indicates that the growth must therefore be coming from the Mass-Dollar-Club channel. It’s evident that the private brand picture depends on the channel.

So what’s a food retailer to do? To better understand potential growth opportunities for food retail private brands, let’s take a closer look at how private bands are preforming in specific categories and departments.

Spotlight on Organic Private Brands

Looking at the data, shoppers turn to private brands when making organic purchases. For example, the organic private brands segment is growing, with a 0.3 point share increase in the past year. The segment with the biggest organic presence is refrigerated, which has a 9 percent share and increased 1 point in the past year. At the same time, private brands sales represent about 20 percent of food and beverage sales overall, but when it comes to organic items, private brands represent close to 30 percent of sales and this remains consistent across departments. Clearly there is an opportunity for food retailers to continue to leverage the private brands organic value proposition with shoppers.

The Recipe of Premium and Value

According to IRI Consumer Connect data from the third quarter of 2017, nearly one-third of U.S. households struggle to afford groceries. For these households, private brands represent a price value that is essential to meeting their grocery shopping needs. At the same time, IRI finds that premium and organic products are more likely to be purchased by higher earners. This means the recipe for private brand success includes offering private brand tiers to meet the needs of the value shopper, but also satisfies the premium shopper.

Swimming Up Stream

Food retailers have done a lot to change the frozen seafood category and it’s starting to pay off. Offerings in this private brands category have shifted from inexpensive frozen, breaded seafood to a wider variety of healthier options. Today, private brands frozen seafood is presenting a stronger value proposition with a range of price points. While mainstream private brands still represents more than half the dollar business, premium and value combined represent 75 percent of the category, making the frozen seafood private brands category an example to look at for other categories.

In Conclusion

Private brands continue to experience a rise in consumer awareness and acceptance, and in response, retail outlets across the value chain are making private brands a strategic priority to differentiate and drive loyalty. We have also witnessed a number of non-traditional retail outlets join the private brands movement to differentiate. Therefore, traditional grocery retailers that have private brands as one of a number of strategies for consumer engagement and loyalty, should mine their customer data to identify and better understand shoppers’ motivations.

Download Power of Private Brands: At the Register 2018

Download Power of Private Brands: From the Consumer 2018