Will store brands outcompete national rivals in fresh categories?

Discussion
Nov 19, 2015

Store brands have seen impressive growth since the start of the Great Recession about seven years ago, more than doubling sales and capturing about one-quarter of all supermarket volume. Much of this growth has been in dry groceries and non-foods categories, two areas facing stagnant sales due to changing shopping behavior and under attack from a wide variety of competitors. One of the key areas of growth in supermarkets has been in the perimeter/fresh categories, so perhaps it’s no surprise that the Private Label Manufacturers Association’s (PLMA) Annual Conference this week in Chicago targeted dairy, deli and bakery for growth.

Supermarkets have long had their own milk, egg, bread and juice programs, but now they’re moving aggressively into sub-categories like hummus and other specialty spreads, imported cheeses and gourmet bake-off cookies. The move to organics has also pushed the product proliferation in fresh categories, with at least 200 organic fresh and prepared foods vendors this year, roughly double last year’s number. Plus, dozens of more traditional suppliers are now promoting their fresh lines.

Whole Foods 365 Dairy

Source: Whole Foods

"The emphasis on dairy, deli and bakery is a reflection of companies coming to us last year and asking for more private label in those categories. For the consumer, these categories are an important reason for them to shop in a store and, if we can establish that private label can help build sales, the retailer will benefit," said Brian Sharoff, president of PLMA.

What impact will private label have on the marketing of fresh categories in the next few years? What are the next hot categories for store brands?

Braintrust
"There are really no limits on private label any more. The Great Recession consolidated store brands as a major force in mass-market retailing, and the expansion of private label into new areas is going to continue, likely unabated."
"There’s no doubt that the recession, coupled with sharp increases in the price of groceries ($6 a pound for ground beef?) have altered consumers’ habits and expectations."

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9 Comments on "Will store brands outcompete national rivals in fresh categories?"

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Max Goldberg
BrainTrust

Fresh is a great growth opportunity for private label. Whether real or imagined, consumers believe that fresh items are better than their prepackaged competitors. If grocers can offer fresh, tasty, perceived-to-be-healthy baked and deli goods to consumers, they will sell. And the margins in bakery and deli make this effort financially worthwhile.

Richard J. George, Ph.D.
BrainTrust

Private label fresh categories have a tremendous upside. The noted private label surge came in part from branded manufacturers failing to maintain their value proposition. This, in turn, gave retailers the opportunity to market own brand value labels.

Fresh is different. Fresh can be positioned as a store’s differential advantage. Fresh private label allows a food retailer to “think like a brand and act like a retailer.”

Chris Petersen, PhD.
BrainTrust

The question in one word is: QUALITY

Based upon consumer experience, they have grown to trust the quality, consistency and reliability associated with branded products. They are not willing to trade quality merely for a cheaper price.

Current research shows that today’s consumers are “less brand loyal,” especially Millennials. Consumers are willing to experiment with private label foods and purchases will grow if they perceive both quality and value.

The hottest categories for store brands will most probably fall into the “healthy, natural, organic” categories. Private label brands have an advantage in that consumers tend to associate fresh and organic with local. They can significantly grow sales if they can further differentiate on local flavors, taste, style, etc.

The key is getting prospective consumers to literally taste the QUALITY so that they are willing to switch. Serving samples in the aisles is an old practice that still works in food aisles today.

Roy White
Guest
Roy White
1 year 10 months ago

There are really no limits on private label any more. The Great Recession consolidated store brands as a major force in mass-market retailing, and the expansion of private label into new areas is going to continue, likely unabated. With store brands now freed of the fetters of national brand leadership, retailers are becoming more and more innovative and aggressive in developing products, and private label manufacturers have taken up the challenge and are providing new ideas, new items and new technology for their retail partners. Every category in the store is now open to intense and extensive store-brand marketing.

Cathy Hotka
BrainTrust

There’s no doubt that the recession, coupled with sharp increases in the price of groceries ($6 a pound for ground beef?) have altered consumers’ habits and expectations. Grocers have done a great job of adapting to customer preferences before and there’s no reason to think they can’t roll with the changes now.

Brian Kelly
Guest
1 year 10 months ago

Does the role of private label vary from category to category?

Isn’t a robust and relevant private label program the potential differentiating attribute to an omnichannel shopper?

Or as we alternatively like to say, “relevant brand differentiation ain’t for sissies!”

gordon arnold
Guest

What makes this the right time to create a brand of any kind is the consumer’s rapid departure from tradition. The 21st century understands the ramifications of living with the wrong decision better than ever before. The majority reason for this is just how quickly and easily we can get the information we need to make a good decision for all. Retailers keeping in touch with this trend must also discipline themselves to stay tuned for profit taking involvement. Owning very low margin, high turn/volume product is always more dangerous than typical C-D turn items.

charles pavia
Guest
charles pavia
1 year 10 months ago

Common fact is the perishable perimeter departments are exerting a lot of pressure on the traditional center store CPGs. Both categories require better packaging in the areas of vivid color and sharp graphics. Use store perimeter brands to build image and awareness, and center store CPGs to stand out with reduced aisle traffic. No matter where you are in the store, you need to capture the cart on a daily basis and earn you shelf space every day.

Robert Dyer
Guest
Robert Dyer
1 year 10 months ago

Private label will continue to innovate and expand its role in the assortment and profitability of categories. Fresh is the logical next step for these products, given that the retailer already has the credibility to deliver quality products in Fresh. As the dairy and bakery departments are fairly well penetrated by retailers, I see the deli and meat areas as being key areas for growth. I see the potential for great success for private label in these two departments if the retailer focuses on local tastes, seasoning, and food types that best address their demographics. I look to H-E-B as a leader in these areas today.

wpDiscuz
Braintrust
"There are really no limits on private label any more. The Great Recession consolidated store brands as a major force in mass-market retailing, and the expansion of private label into new areas is going to continue, likely unabated."
"There’s no doubt that the recession, coupled with sharp increases in the price of groceries ($6 a pound for ground beef?) have altered consumers’ habits and expectations."

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