Private-Label Offerings Predicted to Grow This Year

Consumers want quality, safety, variety and attractive retail prices.

April 29, 2021

Mendez Fuel Private Label Lager Beer Cans in Basket

ALEXANDRIA, Va.—Sales of private-label products are expected to accelerate after a disappointing 2020, thanks to ongoing innovations, e-commerce and consumers' growing willingness to try new brands, reports RetailDive.com.

In recent months, two-thirds of consumers have changed their buying habits, with the newly budget-conscious shoppers percentage doubling between September and December, according to NielsenIQ data. Although private label accounts for only 4% of grocery e-commerce sales, that number has quadrupled during the past two years, pointing to an opportunity for retailers to capitalize on changing habits. 

In 2020, the sales growth of national brands outpaced the growth of private labels for the first time in 10 years, according to NielsenIQ. Consumers increased their purchases in an area where private label is "less developed" with items such as ingredients and unique treats to help them replicate the experiences they were missing at cafes and restaurants, said Kara Sheesley, vice president of retail engagement at NielsenIQ. And even as retailers and suppliers face a more normalized supply chain environment, private labels are expected to outpace national brand growth this year.

When tracking consumers' attitudes toward spending over the past year, NielsenIQ put them into two groups: "constrained" and "insulated." The percentage of shoppers falling into the former category has grown, according to the company. Indicating a higher percentage of shoppers who are watching their budgets among widespread uncertainty and concerns over unemployment, "newly constrained" consumers increased from 23% to 46% between September and December. 

Insulated shoppers gravitate more toward new and innovative products, but private labels are bought by both constrained and insulated shoppers. Those with tighter budgets tend to play to the benefit of store brands. Eighty percent of consumers say they're restructuring their spending habits, according to NielsenIQ,. "A lot of consumers are really fundamentally saying, 'Hey, I need easier access to more value, and quite honestly, I want a greater variety of quality and value products,'" Sheesley said.

Online shopping will be the next major merchandising opportunity for private-label growth. Two-thirds of consumers say they often feel there's a disconnect between the two channels, online and in-store shopping, but they're shopping using both. Retailers have control over their online platforms and can drive sales, she said.

"Retailers own that space, and so they actually have more control over what your eye is taken to, which also means that it creates a great opportunity for retailers to support the growth of their own brands," Sheesley added.

Kerry, a global supplier of food and beverage ingredients, noted consumers seek pricing, safety and variety when they shop, citing a proprietary survey of 1,500 private-label consumers. The firm divided store brand consumers into two groups: "practical traditionalists" and "adventure seekers." Adventure seekers are less price-sensitive, more experimental and gravitate toward emerging categories, such as plant-based foods, while practical traditionalists focus on price, mainstream categories and convenience.

According to Sarah Miller, marketing insights manager, Kerry, the need for companies to "optimize" the store brand products they have and to enter new categories is reinforced by both of the two groups. Retailers like Kroger have expanded their selection of plant-based private label offerings, and Albertsons recently unveiled a line of sustainable wines and introduced compostable nonfood items over the past year, taking note of the trending market there is for private labels.

"Innovation can come in different forms—from true newness to the market to optimization of current products and categories,” Miller said. “There's potential to innovate from both ends here."

As NACS Daily reported in February, several convenience operators have been successful with lines of private-label products, including Casey’s, 7-Eleven and Yesway.

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