Private Labels Soar as Inflation Rises

Company-owned brands historically flourish during economic downtimes.

February 07, 2022

Casey's Private Label Items

ALEXANDRIA, Va.—Consumers are flocking to private-label products, as record-high inflation has increased costs for consumers, forcing them to seek out cheaper products, reports Modern Retail.

Target’s private-label brands grew 36% in the first quarter of 2021, the strongest the company has ever recorded. Last March, Kroger reported a record 13.6% year-over-year to $26.2 billion sales increase for its store brands.

Consumers who gravitate toward private labels are older and have higher household incomes, according to IRI, with 55% of private-label purchasers having a household income of less than $70,000.

Historically, private-label brands thrive during inflation rises and economic uncertainty. During high inflation in the 1970s, private labels grew more prominent as cost-effective substitutes to name-brand products, and in 2008, store-label brands excelled, according to a 2008 New York Times article.

Data from Numerator shows that 55% of consumers have changed some of their shopping habits, and of those who were surveyed, 54% said they are moderately or significantly concerned about future spikes in prices.

“Private labels are price points that are the openers in the category and therefore more accessible,” Keith Anderson, Profitero’s senior vice president of strategy, told Modern Retail.

Private labels are more available now than ever before. Target has more than 45 private-label brands. Bed Bath & Beyond, as part of its three-year strategy, planned to launch eight private-label brands in 2021.

Convenience stores have been getting in on the private-label game for some time. 7-Eleven launched its first private-label brand 7-Select in 2008, and in 2019, the company launched 24/7 Life, with total private-label selection at 1,500 products. According to 7-Eleven, about eight out of every 10 Americans buy private-brand products to save money, NACS Magazine reported in “Private Matters” in the April 2021 issue. Millennials have a particular affinity for the value and quality that the brands offer, the chain said, and are contributing to the growing popularity of retailer brands.

Ankeny, Iowa-based Casey’s rolled out a line of own-label soft drinks, juices and ready-to-drink iced teas and lemonades, plus packaged snack cakes, in November 2020 as the chain relaunched its private-brand program. Then in January 2021, the c-store added more than 100 Casey’s branded snacks and beverages and continues to consider adding to its private-label assortment.

Foxtrot says its specialty is its private labels, and the company says it’s “investing in a deeper private label assortment around meal-times.” Over the next year, Foxtrot plans to create and launch about 200 new private label SKUs. Since introducing private label products one year ago, the assortment of Foxtrot-branded and -created labels now account for nearly 30% of all retail offerings and nearly half of all brick-and-mortar and online sales.

Gopuff, a virtual on-demand convenience store, is launching private-label products under the brand name Basically, starting with snack, household products and health and wellness products.

The opportunity for improved profits is one motivator for retailers considering private-label products.

“In some cases, margins could be 25% versus 18% for a national brand,” said Roy Strasburger, president of StrasGlobal, a Temple, Texas-based convenience-store operations and consulting company. Marketing and promotional control over the brands is another benefit, allowing c-stores to become destinations for products not available anywhere else. “If done successfully, it’s not the store pushing the product, but the product pushing the store,” Strasburger told NACS Magazine.

A category deep dive at the 2022 NACS State of the Industry Summit, which will take place April 12-14 in Chicago, will cover private-label performance in the convenience retail channel. Hear from Ben Hoffmeyer, vice president of marketing and foodservice, TXB Stores, who will lead the session.