CPG companies have been feeling the pain from store brands for close to a decade now. Increased quality, curated offerings and better graphics have all led shoppers to try and in many cases then switch to the store brand offering.
The latest salvo in this war is about data. Supermarkets used to rely heavily on data and insights on everything from shelf placement to how to market and promote foods from the likes of their CPG partners as well as Nielsen and IRI, to name just a couple. Then "category captains" were created. Usually staffed from the leading CPG brand and headquartered at the retailer’s location, those CPG companies offered retailers insights and recommendations on how to sell more product across the entire category—not just their own brand. Those positions are being eliminated. The source and quality of data has changed. Grocers are relying on their own proprietary research to decide how and where and at what price to place products—their own brands as well as those from CPG.
Kroger and Walmart are using increasingly sophisticated software to decide where to place items and which products to shelve next to one another—factors that can move sales up or down several percentage points. The software—which can incorporate video surveillance of shoppers and how they react to displays and the time they take in selecting, or not, a product and was widely exhibited at the National Retail Federation in January—helps them create much more sophisticated plan-o-grams.
Stocking private label brands next to name brands increases sales. In 2018, sales of private label nonalcohol drinks, for example, rose 4.9%, faster than national brands did. Kroger owns 33 manufacturing plants to make various store-branded products, including staples such as maple syrup and flour, and even plant-based burgers. Those products make up a growing share of its sales and shelf space.
A total of $17 billion of annual CPG brand sales, roughly 3.5% of the market, has shifted from these incumbents to startups since 2013, according to Nielsen data that also points out that publicly traded food makers have faced declining retail distribution over the past year. In January, their total points of distribution were down 2.8% from a year earlier.