Private Label: an Increasingly Effective Retail Lever

Sep 23, 2024 at 3:30 PM

The Rise of Premium Private Label: Redefining Value and Quality in the Grocery Aisle

In a remarkable shift, private label products have shed their "white label" stigma, emerging as a premium, value-driven option that can rival national brands in price, quality, and taste. The COVID-19 pandemic served as a catalyst, driving consumers to explore new products and scrutinize the specifications and quality of their purchases. This transformation has positioned private label as a formidable contender in the grocery landscape, with retailers and manufacturers alike recognizing the immense potential it holds.

Unlocking the Power of Private Label: Delivering on Quality and Value

Wakefern's Commitment to Excellence

Pam Ofri, the director of Own Brands at Wakefern Food Corp., emphasized the company's unwavering dedication to delivering national brand quality or better through its private label offerings. "We try hard to be national brand quality or better. The 'or better' part is why we put a lot of time and investment into quality because Wakefern is the stamp on every product," she explained, underscoring the importance of quality assurance in building consumer trust and loyalty.Ofri's insights shed light on the strategic approach Wakefern has taken to elevate its private label brand, recognizing that a successful private label initiative requires consumers to trust the brand and its offerings. By consistently delivering on quality, Wakefern has positioned its private label as a viable alternative to national brands, catering to the evolving preferences of today's discerning shoppers.

Spartan Surge: The Rise of Premium Private Label Brands

The keynote presentation by Food Institute CEO Brian Choi delved into the data-driven findings that have fueled the growth of private label sales across U.S. grocers. Choi highlighted the success of SpartanNash's premium private label brand, Finest Reserve, citing a buyer's observation that customers are not only forgoing away-from-home dining but also perceiving the quality of Finest Reserve to be on par with, if not better than, national brands available at retail.This sentiment is corroborated by independent data from Nielsen IQ, which found that the perception of private label offerings has improved significantly. The report revealed that 44% of respondents believe store brands offer good value for their money, 40% consider store brand products a suitable alternative to national brands, and 35% believe some store brand products are equal to or higher in quality than their national counterparts.

The Importance of Quality in Private Label Branding

The panel discussion also featured insights from Camerican International president Josh Gellert and Mike Sainsbury, the head of strategic food at Market Performance Group. Sainsbury offered a compelling explanation for the retailers' unwavering focus on quality when it comes to private label products."Think about what's at stake for private label. Quality matters so much because... [a customer's] bad experience could ruin that brand across other parts of the store," Sainsbury said. This underscores the critical role that quality plays in building consumer trust and loyalty, which is essential for the success of a private label brand. A single negative experience can have far-reaching consequences, potentially undermining the entire private label initiative.

The Rapid Growth of Private Label: Opportunities and Challenges

Choi's presentation also explored the category's growth potential, both for retailers and brands looking to partner with grocers on private label offerings. Citing research from Numerator, Choi revealed that the top private label brands are among the fastest-growing offerings at retail. Kroger's Smart Way brand experienced a 135% increase in household penetration over the last twelve months, while Dollar Tree's B Pure and Walgreens' Complete Home saw 92% and 59% increases in unit volume growth across households, respectively.These impressive figures highlight the growing consumer demand for high-quality private label products, driven by a shift in consumer preferences and the increasing difficulty for branded companies to make a lasting impression in the crowded marketplace. As Gellert observed, "It's really hard to be a branded company today... It's hard for a brand to make an imprint on somebody's brain, and that has opened up this opportunity for private label."Choi's analysis also projected that private label market share could reach between 23-25% by 2030, a significant increase from the current 19% level. This growth trajectory underscores the immense potential of private label and the need for retailers and manufacturers to strategically navigate this evolving landscape.

Advice for Manufacturers: Embrace Uniqueness and Find the Right Retail Partner

When asked about advice for manufacturers looking to partner with retailers on a private label strategy, Ofri emphasized the importance of understanding one's business and uniqueness. Gellert echoed this sentiment, adding that brands need to find the right retail partner who is willing to work with them and believes in their product.This collaborative approach highlights the symbiotic relationship between retailers and manufacturers in the private label space. By aligning their strengths and leveraging their respective expertise, both parties can create private label offerings that resonate with consumers and drive sustained growth in the grocery industry.As the private label landscape continues to evolve, the insights shared by industry leaders at the Forvis Mazars' 2024 Food & Beverage Forum underscore the transformative power of quality, innovation, and strategic partnerships. The rise of premium private label has redefined the value proposition for consumers, positioning it as a formidable force that can challenge and even surpass the dominance of national brands.