Cheaper is More PopularJanuary 16th, 2018
Cornucopia’s Take: Cornucopia frequently receives questions about the integrity of organic store brands, which are often far cheaper than organic name brand and local organic foods. Private-label store brands typically source the cheapest product at any given time, making it difficult to discern the farm origin of their food and raising questions as to its integrity. Organic consumers want to know where their food is coming from and how it is produced. Cornucopia’s dairy and egg scorecards rate organic brands, including private labels, to help consumers choose high-integrity organic options.
Report: More shoppers are choosing retailers for their private labels
by Pamela DeLoatch
- According to a StoreBrands.com, more shoppers choose where they shop based on store brands. Acosta, a sales and marketing company, reported that 53% of shoppers use store brands to determine where they shop now, versus 34% in 2011.
- Shoppers are price sensitive and go to different retailers to buy, the report says. More than 60% of consumers shop at more than one retailer because of price.
- Most shoppers (76%) buy groceries more than once a week, often to get fresh food, including produce and deli-prepared meals.
Private label brands, also called store or house brands, used to be referred to as generic, and had an also-ran reputation — but no more. As taste and quality have improved, private label sales have grown to claim a 17% marketshare in the U.S.
As the Acosta study shows, buying private labels has become not just sensible but trendy, too. German grocers Aldi and Lidl focus on private label items, with 90% of their products being store brands. Larger grocers like Kroger and Walmart are investing in their own private lines. Southeastern Grocers, which operates Bi-Lo and Winn-Dixie stores, earlier this year came out with a three-tier line of store brands that incorporated extensive consumer testing and investment in clean labels.
One of the boons for Amazon when it purchased Whole Foods in August was to get — in addition to brick and mortar space — the grocer’s popular 365 Everyday Value brand, which racked up $10 million in sales on Amazon.com in just four months.
While the success of private brands is encouraging, what does it mean for national brands? At Costco, national brands are having to fight for space on shelves alongside the club’s popular Kirkland Signature products. Large retailers like Walmart, meanwhile, are pressuring suppliers to lower prices on national brands in order to be more competitive. For many struggling CPG companies, private label’s growth amounts to another pressure that’s being applied to their bottom line.
Millennials—the largest generation of shoppers—are notoriously less brand loyal than older generations, and as indicated in the Acosta report, are more likely to switch up where they shop based on convenience and brands. They are a key target for grocer’s store brand efforts, with packaging and product attributes trending towards edgy in an effort to capture these customers. Case in point: Uniquely J, Jet.com’s new private label line that includes coffee bags splashed with skulls and bear prints, bottles of salsa lined with peppers arranged in various patterns, and variations of a purple cross-hatch design that appear on boxes of tissues.
Private labels allow grocers to set themselves apart from the competition. Regional supermarkets and stores can tailor their products to correspond to local trends and preferences, allowing them to offer more personalization. For all of the advantages they offer, private labels are in some ways still an open secret. Retailers could do more to expose consumers to their store brands through low cost methods such as in-store events, recipe suggestions and online marketing.