The grocery channel is experiencing a resurgence in private brands, according to the latest insights from Food Marketing Institute (FMI) and IRI.
The first of a four-part series in FMI and IRI’s annual study of the Power of Private Brands reveals a drastic increase in private brand performance, posting annual sales of $138 billion across U.S. multioutlet and convenience-store retail channels in 2017.
Retailers have been pouring resources into elevating their private brands over recent years, leading to improved consumer perceptions of a category that was once deemed to be of “lesser quality” compared to manufacturer brands. And while their efforts have sparked a private brand resurgence, supermarkets still face competitive challenges and are experiencing steady own-brand share leakage to other retail channels, according to the report.
Noting the fact that 69% of consumers said it’s very or somewhat important to have a good assortment of private brands in food and beverage, FMI VP of Industry Relations Doug Baker in a statement said, “Private brands have become full-fledged brands in their own right, and the research emphasizes the importance of not making assumptions when appealing to demographics and audiences, including how store brands are marketed and positioned.”
He added that 31% of all dollars spent on private brands across all outlets came from Generation X, compared to 19% each for older millennials and younger baby boomers.
The report offers consumer insights on demand trends and how to build engagement as well as how the grocery industry can improve its private brand business, including leveraging shoppers’ desire for variety and increasing trial to further combat negative perceptions of private brands.
“While the news for private brands overall is good, there is a special hurdle for food retailers,” said Mark McKeown, principal of client insights for IRI.
The study also reveals that, while grocery retailers have managed to turn around private brand sales declines and close the gap with national brands, their performance still lags that of mass and club operators, whose private brands performance has been significantly stronger.
“We needed to uncover why the biggest growth is taking place outside the grocery channel,” said McKeown. “Our first step was examining the evolution of private brands into tiers, and which of these were driving growth. We then took a closer look at how private brands are performing in specific categories and departments to address competitive challenges. And this year, we examined the different groups of private brands, including lifestyle (products that cross over categories and departments and deliver a common promise, such as clean label or organic) compared to regular (retailer banner brands that do not deliver a common promise) and how consumers perceived and purchased either.”
WANT BREAKING NEWS AT YOUR FINGERTIPS?
Get today’s need-to-know grocery industry intelligence. Sign up to receive texts from Winsight Grocery Business.